2017.09.2100:00:00UTC+00Gold Falls to 3-Week Low, Weighed Down by Fed Outlook

Gold prices dropped to its weakest level in more than three weeks on Thursday as the stronger U.S. dollar and the increased chances of another Federal Reserve interest rate rise this year have reduced demand.

Spot gold fell 0.2 percent at $1,298.61 per ounce, after earlier falling to its lowest since late August at $1,295.65.

U.S. gold futures for December delivery shed one percent to $1,302.10 per ounce.

The precious metal initially moved higher in the minutes ahead of the Fed's statement, then reversed course and dropped. It briefly plunged below the $1,300 mark that traders had viewed as psychological support. Bullion reached $1,295.81 per ounce, the lowest since Aug. 28.

According to Bill O'Neill, co-founder of Logic Advisors, speculative investors had increased their net long position in gold for nine consecutive weeks, making the market vulnerable to more selling.

The dollar firmed as Asian shares fell marginally following the Fed's announcement to begin reducing its balance sheet and indicated one more rate rise in 2017.

U.S. allies recently said that enforcing international sanctions on North Korea, and not mere dialogue, was the key to getting Pyongyang to give up its nuclear weapons.