Oct 7 (Reuters) - Gold declined to a two-month low on Wednesday, pressured by a strong US dollar and Treasury yields, while investors awaited the minutes of the Federal Reserve's September meeting to gauge the central bank's next policy steps.
Spot gold fell 1.3% to $4,107.88 per ounce by 11:43 a.m. EDT (1542 GMT), touching its lowest level since August 5. US gold futures for December delivery declined 1.3% to $4,133.30.
The US dollar index (.DXY), climbed 0.5%, making greenback-denominated gold more expensive for holders of other currencies, and 10-year US Treasury yields were at an over two-decade high.
Markets are largely expecting the Fed to keep interest rates on hold later this month, but are still pricing in an 84% chance of a December increase, according to CME's FedWatch tool.
"I think the message is rates are going to continue to be higher for longer, and that's keeping yields and the dollar underpinned," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Kansas City Fed President Jeff Schmid said curbing inflation may require further rate hikes. San Francisco Fed President Mary Daly also said the policy path would depend on whether inflationary pressures continue.
Higher interest rates diminish the attractiveness of non-yielding gold.
The minutes of the Fed's September meeting are due at 2:00 p.m. EDT (1800 GMT).
Meanwhile, oil prices rose on continued Middle East supply risks and a storm heading for US oil-producing regions.
"Official gold demand is the main supporting factor. I think we could see one more test to the downside, perhaps as low as $4,000, and then a recovery into year-end with potential to reach $4,400," Grant added.
China's central bank stepped up its gold purchases in September, extending its buying streak to a 23rd consecutive month, official data showed.
Spot silver eased 2.8% to $59.96 per ounce, platinum fell 3.5% to $1,641.45, and palladium lost 4.2% to $1,123.23.
Reporting by Pablo Sinha in Bengaluru; Editing by Joyjeet Das
