Gold prices dipped on Thursday as the dollar strengthened after the US Federal Reserve signalled a withdrawal of its asset purchases by next year and a sooner-than-expected interest rate hike, dimming the appeal of the non-yielding bullion.

Spot gold was down 0.2% at $1,764.06 per ounce, as of 0329 GMT, while US gold futures slipped 0.9% to $1,763.50 per ounce.

New projections from the Fed's two-day policy meet showed half of the officials were ready to raise interest rates next year in response to heating inflation.

Spot gold may fall into $1,756-$1,763 range

Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

Fed Chair Jerome Powell said a withdrawal process of monthly bond purchases could begin after the central bank's November policy meeting as long as US job growth through September is "reasonably strong."

"Everyone is going to be focused on how persistent these inflation pressures are and whether the Fed needs to be little bit more hasty in hiking the Fed funds rate in response ... Once we start talking about rate hikes that's going to be really bad for gold prices," IG Market analyst Kyle Rodda said.

The dollar index hit a one-month high, diminishing gold's appeal for those holding other currencies.

On the technicals front, spot gold may revisit its Sept. 20 low of $1,741.86, as the drop on Wednesday confirmed completion of the bounce from this level, according to Reuters technical analyst Wang Tao.

Silver fell 0.3% to $22.60 per ounce.

Palladium was steady at $2,023.37, after a 6.2% gain on Wednesday, their biggest one-day rise since March 2020.

Platinum edged 0.2% lower to $994.84.