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NEW YORK/LONDON (Reuters) - Gold inched down to a five-week low on Tuesday as the dollar rose following hawkish comments from an influential U.S. Federal Reserve official and dovish remarks from the Bank of England governor.
New York Fed President William Dudley said on Monday that labour market tightness should help drive up inflation, reinforcing the message that recent weak data was unlikely to derail plans to keep raising interest rates.
The greenback .DXY had a further lift on Tuesday following dovish comments from Bank of England Governor Mark Carney.
Also on Tuesday, Boston Fed President Eric Rosengren said the era of low interest rates in the United States and elsewhere posed financial stability risks.
And voting member Chicago Fed President Charles Evans said he was concerned about recent softness in inflation.
"It (another U.S. rate hike) is not entirely unlikely. Gold from now to the end of the year could see slight drops, especially if (on top of Fed hikes) the European Central Bank starts tapering its bond buying program," said Natixis analyst Bernard Dahdah.
Spot gold XAU= was down 0.03 percent at $1,242.36 an ounce by 2:35 p.m. EDT (1835 GMT), after touching a low of $1,241, the weakest since May 17.
U.S. gold futures GCcv1 settled down 0.3 percent at $1,243.50.
"We're going to be living with interest rate increases for quite some time," said George Milling-Stanley, head of Gold Strategy at State Street Global Advisors, adding that he expected "fairly regular" small rate hikes.
"We haven't yet had a post-hike bounce but I believe we will have it."
Investors are pricing in a roughly 50 percent chance that rates will be raised again by the year-end, according to CME FedWatch. A strong dollar makes dollar-priced gold costlier for non-U.S. investors.
"The market attributes considerable weight to Dudley's words, as he represents the majority opinion of the Federal Open Markets Committee," said Commerzbank in a note.
In the wider markets, oil prices fell to seven-month lows and dragged global equities off all-time highs, limiting losses in gold which is seen as an alternative investment to volatile stocks.
"The next key level of support sits around $1,240, with a broad extension to the 200-day moving average around $1,237," MKS PAMP trader Sam Laughlin said in a note.
Among other metals, spot palladium XPD= traded up 1.5 at $873.20 per ounce, and platinum XPT= slipped 0.6 percent to $916.95.
Silver XAG= turned up 0.1 percent to $16.47, having earlier touched $16.37, its weakest since May 12.
Additional reporting by Nithin ThomasPrasad; Editing by Pritha Sarkar and Richard Chang