Gold prices finished Thursday at their lowest levels in three weeks, a day after the Federal Open Market Committee left the door open to hiking interest rates at its December meeting.

Gold for December delivery dropped $28.80, or 2.5%, to settle at $1,147.30 an ounce on Comex. That was the lowest settlement since Oct. 8.

Prices had settled at a one-week high on Wednesday, but then turned lower in electronic trading after the Fed statement was released at the close of the central bank’s two-day meeting.

The market had been fairly convinced that the Fed would hold off on interest-rate hikes this year, but a more hawkish-than-expected statement took the market by surprise. The CME Group’s FedWatch tool shows investors are pricing in a 50% chance of a rate increase at the December meeting, scheduled for Dec. 15-16.

Gold has been a beneficiary of the Fed’s ultraloose monetary policy because commodities like gold don’t offer interest. The dollar also saw a sharp move higher late Wednesday, and that also can drag on dollar-denominated currencies like gold. The dollar hit its highest level against the euro in nearly three months Wednesday, but has since pulled back.

On Comex, other metals ended sharply lower. December silver futures dropped 74.3 cents, or 4.6%, to $15.55 an ounce, while December copper lost 4.2 cents, or 1.8%, to $2.321 a pound.

Source: MarketWatch