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Spot gold was down 0.4% at $1,785.13 per ounce, as of 0702 GMT, while U.S. gold futures also fell 0.4% to $1,787.40.

· Gold prices eased on Thursday as a firmer dollar dented the metal’s allure for holders of other currencies, while investors awaited the U.S. Federal Reserve’s meeting for guidance on its timeline for stimulus withdrawal and interest rate hikes.

Bullion is viewed as a hedge against the inflation and currency debasement likely from widespread stimulus. The Fed’s tapering could tackle both those conditions, diminishing gold’s appeal.

· The dollar index edged 0.2% higher.

· “Central banks want to reduce the emergency accommodation, it’s not needed anymore ... That’s going to be negative for gold over the medium term,” Stephen Innes, managing partner at SPI Asset Management said.

“We will have to start pricing in higher interest rates at some point in the next six months.”

· The Federal Open Market Committee is due to meet on Sept. 21-22 amid growing number of policymakers signalling support for winding up the central bank’s bond-buying programme from this year.

· Hareesh V, the head of commodity research at Geojit Financial Services said gold prices could see a choppy trade in the run-up to the Fed meet.

In the short-term $1,770 is a strong support, a break below which the sell-off can extend towards $1,700, while prices need to break above $1,835 to trigger a rally, Hareesh added.

· Gold Price Forecast: Acceptance below $1,780 to shift bias back in favour of XAU/USD bears

Gold settled below the $1,800 mark and edged lower through the Asian session on Thursday, marking the second successive day of a negative move. A break below $1,780 will shift the bias back in favour of XAU/USD bears, according to FXStreet’s Haresh Menghani.

“Market participants now look forward to Thursday's US economic docket, highlighting the release of monthly Retail Sales figures, Philly Fed Manufacturing Index and Weekly Initial Jobless Claims. The data, along with the US bond yields, will influence the USD price dynamics.”

“A convincing break below the $1,781 area would set the stage for a deeper retracement to the $1,750 level. The downward trajectory could further get extended towards the $1,729-28 intermediate support before gold prices eventually drop to the $1,700 mark.”

“Any meaningful positive move back above the $1,800 mark might continue to confront stiff resistance near the $1,808-10 region (200-DMA). A sustained strength beyond has the potential to lift the metal back towards the $1,832-34 heavy supply zone. The latter marks the multiple-tops barrier, which if cleared decisively should pave the way for a move towards the $1,853 region.”

· Elsewhere, silver dropped 1% to $23.59 per ounce.

· Palladium climbed 1.1% to $2,024.51.

European car registrations dropped in July and August after four months of growth, industry data showed on Thursday, suggesting that a global semiconductor shortage is hitting sales in car dealerships across Europe.

New passenger car registrations fell by 23.6% and 18.1% year-on-year in July and August, respectively, in the European Union, Britain and the countries of the European Free Trade Association (EFTA), figures from the European Automobile Manufacturers’ Association (ACEA) showed.

Gross domestic product (GDP) surged 2.8% in the three months through to June, Statistics New Zealand said, well ahead of a Reuters poll forecast of a 1.3% increase in growth and the Reserve Bank of New Zealand’s (RBNZ) estimate of 0.7%.

The growth surge follows a drop in unemployment in the second quarter to 4.0% and a rise in annual inflation to 3.3%, above the central bank’s 1-3% target range.

· China Evergrande onshore bond trading suspended after downgrade

Foreign investors are growing more worried that Canada's federal election on Monday could result in a deadlock that hampers Ottawa's response to the COVID-19 pandemic and further slows the economic recovery from the crisis.

Reference: CNBC, Reuters, FXStreet