Picture used for illustrative purpose. File

Gold prices hit a six-week low on Wednesday as the dollar strengthened on concerns about rising coronavirus cases in Europe, while doubts emerged over further stimulus from the US Federal Reserve.

Spot gold fell 1.2% to $1,877.52 per ounce by 801 GMT. Earlier in the session, bullion hit its lowest since Aug. 12 of $1,873.70. US gold futures were down 1.4% at $1,882.50, while the dollar index hit an eight-week high.

A firmer dollar makes bullion more expensive for holders of other currencies.

"We are seeing a risk-off environment taking hold, which means that the dollar continues strengthening and there is a lot of pressure on gold prices in the near-term," said Howie Lee, economist at OCBC Bank.

Also weighing on sentiment were mixed signals from Chicago Federal Reserve President Charles Evans, who on Tuesday said the US economy risks a longer, slower recovery and "recessionary dynamics" if Congress fails to pass an additional fiscal stimulus package. 

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It is possible for the Fed to raise interest rates before inflation starts to average 2%, Evans added. Meanwhile, US economic policymakers opened the door to further aid for small businesses hit by the coronavirus, but provided no quick path.

"We are also seeing a slight pessimism about US fiscal stimulus and that has probably curbed inflation expectations just a little bit," said IG Markets analyst Kyle Rodda.

Gold, viewed as a hedge against inflation and currency debasement, has surged about 24% this year, mainly supported by unprecedented stimulus measures by governments and central banks worldwide to revive their coronavirus-battered economies.

The market is still expecting changes in policy settings that could lead to a stronger gold price overtime but that is a longer-term view, he added.

Elsewhere, silver slipped 4.5% to $23.31 per ounce, having hit a nearly two-month low of $23.04 earlier in the session. Platinum and palladium were down 1.1% at $857.17 and $2,196.69, respectively.

Reuters