Gold slid to its lowest in two months on Thursday as optimism around the U.S. debt ceiling talks lowered safe-haven demand for bullion and robust economic data fueled bets of another rate hike by the Federal Reserve.
Spot gold was 0.6% down at $1,944.45 per ounce, having hit its lowest since March 22. U.S. gold futures eased nearly 1% to $1,946.10.
White House and Republican negotiators made some progress in late-night talks over raising the debt ceiling, top congressional Republican Kevin McCarthy said.
"It's a one-two punch for gold ... if a deal is done over the weekend, then that will remove the biggest risk off the table," said Edward Moya, senior market analyst at OANDA.
Gold extended losses after revised estimates showed the U.S. gross domestic product increased at a 1.3% annualized rate last quarter, up from the 1.1% pace estimated last month.
"A rather impressive round of economic data suggests this economy is still showing so much resilience ... the argument for possibly delivering another rate hike is gaining steam here," Moya added.
Traders looked to the Fed-favored inflation gauge, core personal consumption expenditures (PCE) index, due Friday.
Markets now priced in a 41% chance of a 25-basis points hike in June, seeing cuts no sooner than September, according to the CME FedWatch tool.
Gold, a non-yielding asset, tends to lose appeal in a high-interest rate environment.
The dollar climbed to its highest since mid-March, making gold less attractive for overseas buyers, while benchmark Treasury yields were near highs seen on March 13.
Gold was "really viewing things through the lens of the dollar," said independent analyst Ross Norman.
Spot silver eased 0.3% to $23.02 per ounce, while palladium dipped 0.8% to $1,404.45, both near two-month lows.
Platinum edged down 0.1% to $1,022.51.