Spot gold was flat at USD 1,627.98 per ounce, as of 0709 GMT. Prices had earlier hit their lowest since Sept. 28 at USD 1,621.20.
US gold futures were down 0.1% to USD 1,632.70.
The dollar index ticked 0.1% lower, alleviating some pressure off the greenback-priced bullion. Meanwhile, benchmark 10-year Treasury yields held near their highest since mid-2008.
“Gold is still vulnerable as the inflation and interest rate environment is far from favourable,” said Craig Erlam, a senior market analyst at OANDA, adding that the metal had found some temporary support around USD 1,620.
“The recent trend is very much against it… A test of USD 1,600 may be on the cards.”
While gold is often considered a hedge against inflation and economic turmoil, rising US interest rates have increased the opportunity cost of holding the zero-yielding metal, which has fallen nearly 11% so far in the year.
The Fed’s “Beige Book” survey showed US economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, while firms noted that price pressures remained elevated.
The report did little to temper expectations for a fourth straight 75-basis-point Fed rate hike in November.
Gold might consolidate above the USD 1,600 level, with the US core personal consumption expenditures data due next week being the next major inflection point, said Ilya Spivak, a currency strategist at DailyFX.
Indicative of sentiment, holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, fell 6.08 tonnes on Wednesday in their biggest one-day outflow since July 6.
Spot silver fell 0.2% to USD 18.40 per ounce, platinum rose 0.1% to USD 884.75 and palladium slipped 0.4% to USD 1,992.88.
(Reporting by Eileen Soreng in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)