Gold extends losses to one-week low as dollar rallies on Fed hike bets

• Gold hits lowest since November 4
• Dollar climbs to a 19-month high
• US PPI data due on Friday

Gold prices fell for a third straight session to hit a more than one-week low on Thursday, weighed by a robust US dollar, expectations of further monetary tightening by the Federal Reserve and hawkish signals from policymakers.

Spot gold was down 1.4% at $3,931.54 per ounce by 0912 GMT, having touched its lowest level since November 4 earlier in the session. US gold futures for December delivery dropped 1.6% to $3,936.80 per ounce.

"Gold retreated to test key support around $3,970, as sellers focused on persistent US inflation and hawkish comments from several Fed officials," said Ole Hansen head of commodity strategy at Saxo Bank.

"Following the hotter-than-expected CPI readings, speculation has grown that the FOMC could opt for a 50-basis-point rate hike at its December meeting, despite the recent sharp decline in energy prices that may help ease inflation pressures in the months ahead."

Data on Tuesday showed US consumer prices rose more than expected in October, which boosted the dollar to a 19-month high as traders increased bets on further Fed tightening.

Markets now see an 89% chance of a 25-basis-point rate hike in December, while the probability of a larger 50-basis-point move rose to 11% from zero before the inflation data, according to CME's FedWatch tool.

Although gold is seen as an inflation hedge, higher interest rates tend to diminish its appeal as bullion pays no interest. A stronger dollar also puts pressure on gold as it becomes more expensive for buyers in other currencies.

Investors now await Friday's US producer inflation data for further signals on the interest-rate outlook.

Meanwhile, Bank of England policymaker Megan Greene said on Wednesday it was appropriate to "proactively tighten our monetary policy stance" to ward against the risk of wage growth getting stuck at higher levels and firms passing those costs on.

Among other metals, spot silver fell 1.3% to $50.99 per ounce and spot palladium dropped 0.2% to $1,025.81 per ounce after hitting its highest level since October 22 on Wednesday.