Gold posted its biggest loss since March after the Federal Reserve’s first interest-rate increase in almost a decade strengthened the dollar, curbing the appeal of owning precious metals.

The U.S. central bank on Wednesday unanimously voted to raise borrowing costs by a quarter of a percentage point. Higher rates reduce the attractiveness of holding bullion, which doesn’t pay interest or give returns like assets such as bonds or equities.

Gold slumped to a five-year low earlier this month as traders bet that policy makers would raise rates at the latest meeting. The decision was the culmination of a yearlong effort to prepare investors and consumers for the end of an unprecedented era of easy money. Fed Chair Janet Yellen said further tightening would be slow.

Gold futures for February delivery dropped 2.5 percent to settle at $1,049.60 an ounce at 1:42 p.m. on the Comex in New York, the biggest decline since March 6. The metal is headed for a third straight annual decline.

Bullion typically moves inversely to the dollar, which rose 0.8 percent against a basket of 10 major currencies. Fed policy makers forecast that the short-term rate will rise to 1.375 percent at the end of 2016, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.

Source : Bloomberg