Gold on back foot as dollar strengthens after Federal Reserve's minutes

Gold prices slipped on Thursday, weighed down by a stronger dollar after minutes from the U.S. Federal Reserve's latest meeting highlighted inflationary pressures and confirmed that asset purchases tapering is on the cards this year.

Spot gold was down 0.3% at $1,797.54 per ounce, as of 0539 GMT, after gaining for six straight sessions. U.S. gold futures eased 0.2% to $1,797.90.

"Following FOMC (Federal Open Market Committee) minutes, there was a modestly positive response from the dollar and a negative response from gold," said DailyFX currency strategist Ilya Spivak.

"As we get digestion over those FOMC minutes, we're starting to get some concern that perhaps we are looking at a situation where the Fed is starting to shift its focus to fighting inflation."

The dollar index strengthened 0.1% to hover near the highest in three months, making gold more expensive for other currency holders. [USD/]

Fed officials last month felt substantial further progress on the U.S. economic recovery "was generally seen as not having yet been met," but agreed they should be poised to act if inflation or other risks materialised, according to its June policy meeting's minutes.

Though gold is seen as a hedge against inflation, a Fed rate hike will increase the opportunity cost of holding bullion.

Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.2% to 1,040.48 tonnes on Wednesday. [GOL/ETF]

The European Central Bank will on Thursday announce the outcome of an 18-month strategy review, redefining its inflation target and laying down what role it plans to play in the fight against climate change.

Offering some respite to gold, benchmark U.S. 10-year Treasury yields were pinned near more than four-month low. [US/]

Elsewhere, silver dropped 0.8% to $25.92 per ounce, palladium fell 0.7% to $2,832.22, and platinum slipped 1.3% to $1,071.31.