Gold extended losses on Tuesday, falling 1 per cent on a stronger dollar and US Treasury yields. Spot gold hit its lowest level since August 11 at $1,730.50 per ounce and was down 1 per cent at $1,732.30 by 12.31 GMT. US gold futures fell 0.9 per cent to $1,736.50.
Benchmark US Treasury yields gained for a fourth consecutive day to hit a more than three-month peak, and the dollar index rose 0.3 per cent, making gold more expensive for holders of other currencies.
The dollar also competes with gold as a 'safe-haven'. The rise in the 10-year US Treasury yield "provides a massive headline for gold, as it reduces its attractiveness," and the metal looks poised to decline further towards $1,730, said Commerzbank analyst Carsten Fritsch.
Market sentiment therefore remains downbeat with continued ETF outflows and investors are "not very optimistic about prospects for gold," he added.
Holdings of the SPDR Gold Trust fell 0.3 per cent to 990.32 on Monday.
Chicago Fed President Charles Evans on Monday said he expects inflation to rise to 2.4 per cent by 2024 but interest rates to be only on a "gentle incline" upward.
"This concern about more persistent inflation also appears to be becoming a much more consistent theme of central bankers' discourse, with a number of Fed speakers yesterday coming across a little more forcefully when it comes to the start of tapering," CMC Markets UK's chief market analyst Michael Hewson said.
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. Silver slipped 2 per cent to $22.20 per ounce, palladium fell 0.9 per cent to $1,946.27, while platinum rose 0.4 per cent to $984.28.