Gold prices touched a six-week low on Wednesday, as the dollar strengthened with the coronavirus crisis rattling sentiment in Europe, while investors grew wary of further stimulus from the Federal Reserve. Spot gold fell 1 per cent to $1,880.46 per ounce by 0641 GMT (12:11 pm in India). Earlier in the session, bullion hit the $1,873.70 per ounce mark, its lowest since August 12. US gold futures were down 1.5 per cent at $1,879.10 per ounce.
The dollar index hit an eight-week peak, bolstered by upbeat US home sales data and concerns about a second wave of coronavirus infections in Europe.
A firmer dollar makes bullion more expensive for holders of other currencies.
"We are seeing a risk-off environment taking hold, which means that the dollar continues strengthening and there is a lot of pressure on gold prices in the near-term," said Howie Lee, economist at OCBC Bank.
Also weighing on sentiment were mixed signals from Chicago Federal Reserve President Charles Evans, who on Tuesday said the US economy risks a longer, slower recovery and "recessionary dynamics" if Congress fails to pass an additional fiscal stimulus package.
It is possible for the US central bank to raise interest rates before inflation starts to average 2 per cent, Mr Evans added.
Meanwhile, US economic policymakers opened the door to further aid for small businesses hit by the coronavirus, but provided no quick path.
"We are also seeing a slight pessimism about US fiscal stimulus and that has probably curbed inflation expectations just a little bit," said IG Markets analyst Kyle Rodda.
Gold, viewed as a hedge against inflation and currency debasement, surged about 24 per cent this year, mainly supported by unprecedented stimulus measures by governments and central banks worldwide to revive their coronavirus-battered economies.
The market is still expecting changes in policy settings that could lead to a stronger gold price overtime but that is a longer-term view, he added.
Silver fell 4.8 per cent to $23.25 per ounce, having hit a nearly two-month low of $23.04 earlier in the session.
Platinum fell 1 per cent to $858.47 and palladium eased 0.1 per cent to $2,217.75.