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 Gold prices inched down on Thursday, after hitting a more than two-week low in the previous session, as investors grappled with the likelihood of more interest rate hikes by central banks to contain inflationary pressures.

Spot gold was down 0.1% at $1,992.23 per ounce, as of 0332 GMT. U.S. gold futures fell 0.2% to $2,004.00.

"Despite gold's break below $1,980 yesterday, investors were quick to snap up the quick discount and drive spot prices back above this key support level... But we're also on guard for the U.S. Federal Reserve members to remain hawkish into Saturday's blackout period ahead of the Fed's next meeting," said Matt Simpson, a senior market analyst at City Index.

New York Fed President John Williams said on Wednesday that inflation is still at problematic levels and the Fed will act to lower it.

The CME FedWatch tool shows markets pricing in an 83.7% chance of a 25 basis-point hike in May.

Rate hikes reduce non-interest bearing gold's appeal as it raises the metal's opportunity cost.

The Fed will deliver a final 25-basis-point rate increase in May and then hold rates steady for the rest of 2023, according to economists in a Reuters poll.

"A slew of hawkish comments from the Fed, European Central Bank and Swiss National Bank combined with stubbornly high UK inflation has investors second-guessing their calls for rate cuts this year," Simpson added.

Britain's consumer price inflation stayed in double-digit territory in March, while Euro zone inflation eased last month but underlying readings remained stubbornly high, bolstering expectations for more rate hikes from the Bank of England and the ECB.

The dollar index was steady. A stronger dollar increases gold's cost to buyers holding other currencies. [USD/]

Spot silver lost 0.5% at $25.12 per ounce, platinum fell 0.4% to $1,085.81 and palladium dipped 0.5% to $1,607.49.