Gold prices came under pressure on Wednesday, after the Federal Reserve raised interest rates for the second time this year and maintained its outlook of three total rate hikes for this year.
The Federal Reserve increased its key interest rate by 0.25% to a 1.00%-1.25% range on Wednesday, and surprise investors as it maintained its outlook of three total rate hikes for 2017, despite the recent dip in job creation and inflation.
The central bank said it expects that a tightening labour market will lift inflation to the 2% target over the medium term. Fed chair Janet Yellen echoed these remarks in a press conference following the rate decision.
"Employment is near its maximum level and the committee expects inflation to move and stabilise around 2% over the next couple of years" Yellen said.
The bullish comments on inflation and additional rate hikes lifted the Dollar into positive territory against a basket of global currencies, pushing the precious metal to session lows.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange fell $8.64 or 0.68%, to $1,259.53 a troy ounce.
Gold is sensitive to moves higher in both U.S. rates and the dollar - A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates lift the opportunity cost of holding non-yielding assets such as bullion.
Earlier during the session gold traded as high as $1,282.54, after a pair of economic reports undershot expectations, triggering concerns about a slowdown in the U.S. economy.
U.S. consumer prices, a measure of inflation, fell 0.1% in May, as a fall in energy prices, airline fares and apparel weighed on the pace of inflation, the labor department said. The measure of inflation missed forecasts of a 0.2% rise.
Meanwhile, Core Retail Sales sustained their biggest drop in 16 months to 0.3%, according to the commerce department.
The rebound in the dollar weighed on commodities across the board as silver futures pared gains to trade at $16.814, up 0.29%, a troy ounce while platinum futures traded at $933.20, up 0.97%,
Copper dipped 1.25% to $2.564, while natural gas lost 0.94% to 2.938.