Gold prices inch lower on rate hike expectations by Federal Reserve

Gold prices edged lower on Thursday, weighed down by prospects of more rate hikes by the U.S. Federal Reserve even as data pointed to signs of inflation peaking.

Spot gold fell 0.1% to $1,789.83 per ounce by 1741 GMT. U.S. gold futures settled down 0.4% at $1,807.2.

"Gold's been lingering near the key $1,800 level as the market has toned down rate hike expectations, which has also weakened the dollar," although most Federal Reserve commentary continues to hint at more rate increases, said David Meger, director of metals trading at High Ridge Futures.

"The bulk of the rate hikes are already priced into the gold market and what we're trading on is the differences in expectations moving forward." [USD/]

Investors took stock of data showing U.S. producer prices unexpectedly fell in July amid a drop in the cost for energy products, with underlying producer inflation appearing to be on a downward trend.

"Overall, the sentiment remains positive and the path of least resistance remains to the upside for precious metals for now as investors look forward to the end of aggressive rate hikes," said Fawad Razaqzada, market analyst at City Index.

Gold, which yields no interest, got a slight fillip on Wednesday as relatively tame July U.S. CPI numbers toned down bets for aggressive rate hikes from the Federal Reserve.

But some of that optimism faded after Fed policymakers noted that they would continue to tighten monetary policy until price pressures were fully broken.

Meanwhile, U.S. weekly jobless claims rose for a second straight week, the Labor Department said on Thursday, indicating some softening in the labor market.

Spot silver fell 1.2% to $20.32 per ounce, platinum rose 1.7% to $957.54, while palladium was up 2.3% to $2,291.78.

(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber and Krishna Chandra Eluri)