Gold prices on Thursday drifted further away from seven-week highs hit earlier this week, as the dollar firmed on expectations the US Federal Reserve could trim its bond holdings in September.

Spot gold had fallen 0.3 per cent to $1,262.40 per ounce by 0033 GMT. US gold futures for December delivery dropped 0.8 per cent to $1,268.70 per ounce.

Fed to trim bond holdings

The US economy will likely be strong enough for the Fed to trim its bond holdings in September, San Francisco Fed President John Williams had said on Wednesday, in a sign the central bank is close to unwinding a controversial stimulus tool.

St. Louis Fed President James Bullard is opposed to further US interest rate increases by the central bank and warned that more hikes could hinder domestic inflation from achieving the Fed's 2-per cent goal, Market News International had reported on Wednesday.

Mid-September policy meeting

The Fed should not “overreact” to weak inflation especially since data will arrive before a mid-September policy meeting that could clarify whether the weakness is temporary, Cleveland Fed President Loretta Mester had said on Wednesday.

US private employers added 178,000 jobs in July, below economists' expectations, a report by a payrolls processor showed on Wednesday.

Sanctions against Russia

US President Donald Trump grudgingly signed into law new sanctions against Russia on Wednesday, a move Moscow said amounted to a full-scale trade war and an end to hopes for better ties with the Trump administration.

A ban on travel by US passport holders to North Korea will take effect on September 1 and Americans in the country should leave before that date, the US State Department had said on Wednesday.

The Bank of England looks set to keep interest rates at a record low once again on Thursday with investors looking for signs that, faced with Brexit, it is getting nearer to raising rates for the first time in a decade.

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