LONDON: Gold fell on Wednesday as the dollar gained after comments from U.S. Federal Reserve officials raised expectations of an interest rate hike in March and overshadowed President Donald Trump's first major policy speech to Congress.
New York Fed President William Dudley -- one of the most influential U.S. central bankers -- said the case for tightening monetary policy had become "a lot more compelling", while San Francisco Fed President John Williams said he saw "no need to delay" raising rates.
Having priced in only around a 30 percent chance that the Fed would move this month before the comments, investors moved to price in around a 68 percent probability of a March hike, according to Reuters data.
"Rate rises are now priced in to futures but not in to gold, so the risk is to the downside (for gold)," said Mitsubishi analyst Jonathan Butler.
Rising U.S. interest rates increase the opportunity cost of holding non-yielding gold, while boosting the dollar.
Spot gold dropped 0.5 percent to $1,242.07 an ounce by 1250 GMT, heading for a third straight day of losses. The metal hit its highest since Nov. 11 at $1,263.80 on Feb. 27.
U.S. gold futures fell 0.9 percent to $1,242.40.
"Fed Chair Yellen will be giving a speech on Friday. If Yellen's remarks also point to a rate hike in the near future, this will weigh on the gold price," Commerzbank said in a note.
Expectations that Trump would give details on stimulus plans on Tuesday were largely disappointed, with the President failing again to provide detail on tax reform and infrastructure spending.
The speech did, however, contrast with the harsher rhetoric investors have come to expect, thus tempting some into riskier assets and slightly knocking gold's appeal as a safe haven.
"Gold prices are reacting to the bullishness in other markets and are easing accordingly. That said, with Trump's speech not giving much substance there is still room for disappointment," said FastMarkets analyst William Adams.
The dollar index climbed as much as 0.7 percent to its highest in seven weeks
India's February gold imports surged more than 82 percent from a year ago as consumers ramped up purchases for weddings, provisional data from consultancy GFMS showed.
Spot silver was flat at $18.31 an ounce, platinum fell 0.3 percent to $1,022.50 and palladium gained 0.5 percent to $772.50.