Gold prices fell on Thursday, weighed down by a spike in U.S. Treasury yields and growing expectations of an aggressive U.S. interest rate hike by the Federal Reserve in March.
Spot gold was down 0.2% at $1,803.70 an ounce, as of 12:49 p.m. EST (1749 GMT), after falling 1% earlier in the session.
U.S. gold futures fell 0.2% to $1,806.30.
"Gold is once again being hit by the fact that central banks are gradually coming around to the idea that tightening is going to be warranted to get inflation under control," said Craig Erlam, senior market analyst at OANDA.
"It's clear the central bank is the latest to accept it underestimated the inflation problem and markets are now pricing in multiple hikes."
Benchmark 10-year note yields jumped to 1.838%, its highest in nearly a week after a hawkish rate hike by the Bank of England boosted investors expectations towards similar moves by the U.S. central bank.
Fed officials have signalled they will start raising interest rates next month to fight high inflation.
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Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.
Gold's decline came despite a weaker dollar and an overall risk-off sentiment in the Wall Street.
Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell more than expected last week.
Investors are now eyeing Friday's closely watched U.S. non-farm payrolls report for January.
"A spike in 10-year yields closer to the psychologically-important 2% mark could spark the next leg down for spot gold," said Extinity analyst Han Tan.
However, gold could see a lift from a subdued U.S. jobs report, forcing markets to rethink how aggressive the Fed needs to be to tame inflation, Tan added.
In other metals, silver dropped 1.3% to $22.32 an ounce, platinum fell 0.8% to $1,024.73 and palladium declined 3.1% to $2,296.23.
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