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Gold prices fell on Thursday to their lowest in nearly a year, weighed down by the prospects of more interest rate hikes by major central banks to tackle soaring inflation.

Although gold is seen as a hedge against inflation, rising interest rates increase the opportunity cost of holding bullion, which pays no interest.

Spot gold was down 0.2% at $1,692.80 per ounce, as of 0516 GMT, after falling to its lowest since early August 2021 at $1,689.40 earlier in the session.

U.S. gold futures fell 0.6% to $1,689.50 per ounce.

"Clearly inflation expectations are receding because the Fed and other central banks are embarking on aggressive tightening regime, which is undermining gold's appeal," said Ilya Spivak, a currency strategist at DailyFX.

The European Central Bank is set to raise interest rates for the first time in 11 years on Thursday, with a bigger-than-flagged move seen as increasingly likely as policymakers fear losing control of runaway consumer price growth.

The U.S. Federal Reserve is widely expected to raise rates by 75 basis points at its policy meeting next week.

British inflation in June surged to a 40-year peak, bolstering chances of a half-percentage-point Bank of England rate hike next month.

"Gold broke below $1,700/oz as investors continue to reduce exposure to the sector ahead of central bank meetings," ANZ analysts said in a note.

Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3% to 1,005.87 tonnes on Wednesday, their lowest since January. [GOL/ETF]

Capping gold's losses, the U.S. dollar slipped 0.3% against its rivals. A weaker greenback makes gold cheaper for holders of other currencies. [USD/]

Elsewhere, spot silver fell 0.4% to $18.59 per ounce, platinum dipped 0.4% to $854.65, and palladium rose 0.5% to $1,871.35.