Gold fell as a stronger dollar made gold less appealing

The yellow metal weakened on Thursday, as a stronger dollar made gold more expensive for holders of other currencies. Moreover, investors tried to grasp mixed signals from U.S. Fed officials on interest rate hikes. They are waiting for more economic data to measure inflationary pressures

Spot gold declined by 0.2% and traded at $1,774.96 per ounce. Meanwhile, U.S. gold futures dropped 0.4% to $1,776.10.

The U.S. dollar index held firm below an 11-week peak versus its rivals.

On Wednesday, two Federal Reserve officials announced period of high inflation in the United States may last longer than expected. The announcement came a day after Fed Chair Jerome Powell downplayed inflation worries. He signaled interest rates would not bike too quickly.

But Atlanta Fed President Raphael Bostic anticipates interest rates will need to increase in late 2022. Remarkably, inflation is well above Fed’s 2% target.

Gold has been often considered as a hedge against inflation. A rate hike by the Federal Reserve will boost the opportunity cost of holding bullion and reduce its appeal.

Investors wait for U.S. producer price inflation data due on Friday

Moreover, investors are waiting for U.S. producer price inflation data due on Friday. Jobless claims are likely to come later in the day, while U.S. non-farm payrolls are due next week.

According to Hareesh V, Research Head Commodities at Geojit Financial Services, a firm U.S. dollar and a steady performance of risky assets resume hitting the safe-haven appeal of gold. Expectations of a rate hike from the Fed and optimistic global economic sentiment too contributed to the decline. Remarkably, concerns over inflation restricted major selloffs in prices.

Reuters technical analyst Wang Tao announced spot gold is biased to downside and may test a support at $1,769 per ounce. A break below that level could open the way towards the range of $1,734-$1,744.

Among other precious metals, silver traded at $25.87 per ounce, while palladium traded at $2,613.16. Platinum declined by 0.3% and settled at $1,080.56.