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Gold prices are set for their first quarterly decline in three on Friday as expectations of more interest rate hikes by the U.S. Federal Reserve and its global peers dimmed the outlook for bullion.

Spot gold fell 0.2% to $1,904.94 per ounce by 1203 GMT, down 3.2% for the quarter ending June 30.

U.S. gold futures dropped 0.3% to $1,912.60.

"With inflation remaining a concern and central banks signalling the continuation of rate hikes, gold is losing some of its shine as the opportunity cost of holding it rises," said ActivTrades senior analyst Ricardo Evangelista, adding that "overall sentiment of gold investors is somehow bearish."

Gold briefly dropped below the key $1,900 level on Thursday for the first time since mid-March, as a slew of data through the week painted a picture of a resilient U.S. economy and cemented bets for more policy tightening. [USD/]

Most U.S. central bank policymakers expect they would need to raise interest rates at least twice more by the year's end, Fed Chair Jerome Powell said.

Interest rate hikes weigh on gold because they tend to lift bond yields and in turn raise the opportunity cost of holding non-yielding bullion.

Market participants are now awaiting personal consumption expenditures (PCE) data for May later in the day, with core PCE expected to be 4.7% on a year-on-year basis, well above the Fed's 2% target.

"The narrative is now getting digested by the market, where core inflation is still sticky in your economy and you are still doing well, which justifies higher rates for longer," said Harshal Barot, a senior consultant at Metals Focus.

"Markets have now completely ruled out rate cuts for 2023," he added.

Spot silver fell 0.7% to $22.39 per ounce. Platinum dropped 0.7% to $888.11, and was set for its biggest monthly decline since March 2020.

Palladium shed 0.6% to $1,221.68, and headed for its third quarterly fall, down about 16%.