PRECIOUS-Gold hits one-week low as dollar strengthens on hawkish Fed

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ECB raises rates by 50 bps, signals more hikes

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Bank of England raises rates to 3.5%

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Silver down more than 3%

(Adds details and updates prices)

Dec 15 (Reuters) – Gold prices retreated more than 1.5% on Thursday, falling to their lowest levels in a week, as the dollar strengthened after the U.S. Federal Reserve signalled higher interest rates for a longer period.

Spot gold was down 1.7% at $1,775.74 per ounce, as of 1321 GMT. U.S. gold futures fell 1.8% to $1,786.40.

“The tone was certainly very hawkish from the Fed in terms of the rate rise than some market participants expected and that has definitely spooked gold,” said independent analyst Ross Norman.

“So again, we are seeing slightly exaggerated moves, but the broad theme is the dollar is up, interest rates are rising, and that’s a headwind for gold.”

The Fed raised interest rates by half-a-percentage point on Wednesday and projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.

Following the statement, Fed Chair Jerome Powell said the U.S. central bank will deliver more rate hikes next year and it was too soon to talk about cutting rates.

Gold is traditionally considered an inflation hedge, but higher interest rates dim bullion’s appeal by increasing the opportunity cost of holding the non-yielding metal.

Making gold more expensive for other currency holders, the dollar was up 0.5% against its rivals.

“Broadly into 2023, I still favour gold to trade higher but near term into end-year, I won’t rule out any profit-taking or pullback in prices,” said OCBC FX strategist Christopher Wong.

The European Central Bank raised interest rates by half-a-percentage point on Thursday, while the Bank of England raised its key interest rate to 3.5% from 3% despite a looming recession.

Elsewhere, silver dipped 3.3% to $23.11 per ounce, platinum lost 1.4% to $1,014.41 and palladium was down 1.5% to $1,886.43. (Reporting by Brijesh Patel and Ashitha Shivaprasad in Bengaluru; Editing by Eileen Soreng and Sherry Jacob-Phillips)