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Gold prices hit a six-week trough on Thursday, as sentiment was weighed down by a firmer U.S. dollar and prospects of aggressive interest rate hikes by major central banks to tame inflation.

Spot gold was down 0.3% at $1,706.40 per ounce, as of 0725 GMT. Earlier in the day, bullion hit its lowest level since July 21 at $1,701.10.

U.S. gold futures shed 0.5% to $1,717.40 per ounce.

"I recognise it (gold) is likely to languish for some time," said Clifford Bennett, chief economist at ACY Securities.

"The long-term outlook for gold is positive, but first it will experience the same general deleveraging as stocks. Gold could fall as low as $1,600 in the meantime."

Gold prices marked a fifth monthly drop in August, their longest run of monthly losses since 2018, as the U.S. Federal Reserve signalled to keep borrowing costs as high as needed to quell inflation even if it means some pain to households and businesses.

Euro zone inflation rose to a record high last month, solidifying the case for further aggressive rate hikes by the European Central Bank.

Even though gold is seen as a hedge against inflation and economic uncertainties, higher interest rates increase the opportunity cost of holding bullion while boosting the dollar.

Making bullion more expensive for buyers holding other currencies, the dollar held firm close to a two-decade peak scaled earlier this week. [USD/]

Spot silver, down 1% at $17.79 per ounce, hit its lowest level in more than two years.

Silver has industrial and jewellery uses, and these sectors have not picked up yet, said Brian Lan, managing director at Singapore-based dealer GoldSilver Central, adding that the metal had been overdone a little and might see a consolidation.

Platinum fell 0.6% to $841.45 per ounce, having earlier hit a low since July 14. Palladium rose 0.4% to $2,091.93