Gold fell to a three-month low on Wednesday when the dollar extended its ascent against major currencies as markets dropped expectations of lower U.S. interest rates later in the year.

Spot gold fell as low as $642.90 an ounce, its weakest since mid-March, and was last quoted just above that at $644.55/645.05 at 1013 GMT, compared with $648.30/649.80 last quoted in New York.

Analysts said gold would remain under pressure so long as fears of global monetary tightening prevailed.

Bullion is traditionally a hedge against inflation, but it can become less attractive to investors in times of rising interest rates as it is zero-yielding.

Rising U.S. interest rates boost the dollar, which also hits gold as it becomes more expensive for holders of other currencies.

As higher interest rates globally suppress inflationary impulses and make emerging-market assets less attractive, gold is likely to remain on the defensive, James Steel, metals analyst at HSBC, said in a daily note.

The dollar hit a 4-1/2-year high against the yen and an 11-week peak versus the euro after a rally in U.S. treasury yields boosted its appeal.

Financial markets were braced for U.S. retail sales data, the Federal Reserve Beige Book and speeches from Federal Reserve officials during the day.

Gold traders were eyeing a key technical price level -- the 200-day moving average just above $638 -- as a fall below that might trigger more selling.

From a longer term perspective, we would emphasize that the market has not sustained a break below its 55-day moving average since 2003. This is located at $635 and as a consequence we maintain our longer term bullish bias while above here, Karen Jones, analyst at Commerzbank, said in her weekly price report.

In the physical market, a senior official in top gold consumer India said the nation's rising gold imports pointed to a good year after high and volatile prices dampened volumes last year.

When gold prices first began to decline last week, traders noted good interest from physical buyers.

The New York gold exchange traded fund (ETF) also saw inflows after falling 7 tonnes earlier in the week, to total 473 tonnes, although that is still some way off its peak holdings of just over 500 tonnes in mid-April.

Silver declined with gold, scoring a one-month low at $12.70. Prices then ticked back to $12.86/12.90, still below New York's previous $13.06/13.09.

Spot platinum fell to $1,268/1,273 an ounce from New York's $1,288/$1,292, while palladium slipped to $362/367 from $365/370 an ounce.

Commerzbank Investment Inflation Gold