Gold hovers near 2-week low as firm dollar hurts appeal

Gold slipped on Thursday to hover near two-week lows as a stronger US dollar weighed on prices, while investors sought cues from major central banks as policymakers signalled support for tapering pandemic-era stimulus.

Spot gold fell 0.1% to $1,787.81 per ounce by 0341 GMT, after touching its lowest level since Aug. 26 at $1,781.30 in the previous session.

US gold futures eased 0.2% to $1,790.00.

Nerves among investors continue over the pace of the global recovery and this has continued to push the greenback higher, said Jeffrey Halley, a senior market analyst, Asia Pacific at OANDA, adding that "dollar strength places gold in grave danger of a material fall in prices."

Gold could test support at $1,780 and a failure could see losses extend to $1,750, Halley said.

Rival safe haven - the dollar - was buoyed by cautious risk sentiment, denting the bullion's appeal for those holding other currencies.

The US economy "downshifted slightly" in August as the renewed COVID-19 surge hit dining, travel and tourism, the US Federal Reserve reported on Wednesday.

However, several Fed policymakers have signalled that the central bank remains on track to trim its massive asset purchases this year. Officials will meet again on Sept. 21 and 22.

Markets also eyed European Central Bank's policy decision due at 1145 GMT, where it could take a token step towards unwinding the emergency economic aid while still signalling copious support for years to come.

Non-yielding gold tends to gain in a low interest-rate environment, while some investors also view the metal as a hedge against higher inflation that could follow stimulus measures.

Silver fell 0.1% to $23.94 per ounce, while palladium dropped 0.4% to $2,243.18.

Platinum hit a near three-week low of $971.49 and was last down 0.4% to $975.78.

The World Platinum Investment Council (WPIC) expects the global platinum market to be in surplus this year as mine supply ramps up and investment demand falls.