[BENGALURU] Gold dropped to its lowest price in nearly 10 months on Thursday as the US dollar held firm around 9-1/2 month highs against the yen, boosted by inflation expectations, while growing odds of a US interest rate hike also added pressure.
Spot gold was down 0.4 per cent at US$1,168.60 an ounce by 0236 GMT. The metal hit its lowest since Feb 5 at US$1,163.45 earlier.
US gold futures dropped 0.3 per cent at US$1,167.20 per ounce.
The US dollar was broadly firm, hitting 9-1/2 month highs against the yen, as oil prices surged after Opec agreed to output cuts - lifting inflation expectations and US bond yields.
"Gold has been sensitive to the US monetary policy and US dollar movements," said Mark To, head of research at Hong Kong's Wing Fung Financial Group. "Inflation as well as pace of interest rate hike expectations among the investors are increasing along with the opportunity cost of holding gold."
"That's why gold is coming under selling pressure," Mr To said. "The trading range is moving lower and it is still going to move down further south to US$1,148."
Strong US data on Wednesday pointed to economic strength which could further cement the case for an interest rate hike from the Federal Reserve this month.
Dallas Fed Bank President Robert Kaplan suggested on Wednesday it was time for an interest-rate raise as the US economy was making good progress toward full employment with inflation heading toward the Fed's 2 per cent goal.
The Fed next meets on Dec 14-15 and traders see about a 90 per cent chance that policymakers will raise rates then. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the US dollar, in which it is priced.
Elsewhere, political uncertainty in Europe persisted ahead of Italy's referendum on Sunday, capping the euro, while European Central Bank (ECB) President Mario Draghi warned of risks to the continent's prosperity.
Euro zone inflation hit a 31-month high in November, providing modest relief for the ECB ahead of an interest-rate decision next week.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.13 per cent to 883.86 tonnes on Wednesday.
"In the near term, a strong US dollar, equity gains, and higher bond yields sentiment are likely to weigh on silver,"said James Steel, chief metals analyst for HSBC Securities.
Silver fell 0.7 per cent to US$16.36 an ounce while platinum dipped 0.66 per cent to US$905.
Palladium eased 0.5 per cent to US$765.97. The metal touched its highest since June 2015 at US$774.20 in the previous session.