Investing.com - Gold prices were down sharply during North American morning hours on Wednesday, falling toward a one-week low as the dollar surged amid indications the Federal Reserve is preparing to raise interest rates later this month.
Comex gold futures lost $12.25, or about 1%, to $1,241.75 a troy ounce by 8:45AM ET (13:45GMT), after touching a daily low of $1,240.00.
Spot gold was down $6.90 to $1,241.40 per ounce.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up around 0.6% at 101.91 in New York morning trade. It rose to 101.98 earlier, its strongest level since January 11.
Treasury yields shot up, with the U.S. 10-Year bond up around 10 basis points at 2.460%, after reaching a daily peak of 2.463%, the highest since February 22.
Expectations for a March U.S. interest rate hike mounted after influential New York Fed President William Dudley said that the case for tightening monetary policy "has become a lot more compelling".
Meanwhile, San Francisco Fed President John Williams said that a rate increase was very much on the table for serious consideration at the March meeting.
Fed fund futures priced in about a 70% chance of a rate hike in March, according to Investing.com’s Fed Rate Monitor Tool. Odds of a May increase was seen at 74%, while June odds were at around 85%.
More clues on interest rate hikes ahead of the central bank's March 14-15 meeting are expected to come Wednesday, when Fed Governor Lael Brainard speaks at 6:00PM ET (23:00GMT).
Comments from Fed Chair Janet Yellen at the end of the week will also be in focus. The Fed chief is scheduled to speak on monetary policy on Friday afternoon in Chicago.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
Meanwhile, markets digested a speech by U.S. President Donald Trump to Congress overnight, which offered little details on his plans for infrastructure spending and tax reforms.
The president said he was open to reforming the U.S. immigration system and pledged massive tax relief for the middle class, but did not expand further.
Some analysts said Trump's speech, while lacking details on economic policies, did seem positive after a turbulent month in office.
Also on the Comex, silver futures for May delivery dipped 9.6 cents, or 0.5%, to $18.37 a troy ounce.
Meanwhile, platinum was down 0.5% to $1,025.60, while palladium gained 0.5% to $775.50 an ounce.
Elsewhere in metals trading, copper futures rose 3.3 cents, or about 1.2%, to $2.747 a pound, boosted by a pair of upbeat manufacturing reports from China.