Gold plumbed a six-month low on Thursday as bets for higher-for-longer U.S. interest rates diminished non-yielding bullion's appeal, while traders shifted focus to inflation readings this week for clues on the Federal Reserve's strategy.
Spot gold fell 0.7% to $1,861.59 per ounce, its lowest level since March. U.S. gold futures settled 0.7% lower at $1,878.60.
Higher rates soften gold's appeal as an inflation hedge, and could push prices to $1,800, said Daniel Pavilonis, senior market strategist at RJO Futures.
Treasury yields climbed to a 16-year peak, increasing the opportunity cost of holding zero-yield gold.
But a retreat in the U.S. dollar, which makes gold cheaper for overseas buyers, capped further declines in bullion.
Gold's reaction to data showing the U.S. economy maintained a fairly strong pace of growth in the second quarter, and a separate weekly report showing a slightly lower-than-expected rise in initial jobless claims, was fairly muted.
"Gold has completely fallen out of fashion. In the absence of more promising U.S. data on inflation and the labour market, it may remain a tough environment for gold," Craig Erlam, senior markets analyst at OANDA, wrote in a note.
Minneapolis Fed President Neel Kashkari said on Wednesday it is not clear yet whether the central bank is finished raising rates.
Investors' focus now turns to data on personal consumption expenditures (PCE), the Fed's preferred inflation gauge, due on Friday.
"If the PCE data comes really hot, it is going to be bad for the metals as it would mean interest rates need to be raised more," Pavilonis added.
Spot silver fell 0.2% to $22.48 per ounce.
"The next downside price objective for the (silver) bears is closing prices below solid support at $22.00," Jim Wyckoff, senior analyst at Kitco Metals, wrote in a note.
Platinum added 2.1% to $905.89 and palladium gained 3.7% to $1,267.15.