Sept 17 (Reuters) - Gold climbed more than 1% on Thursday as a softer dollar and easing oil prices lent support, while investors assessed the Federal Reserve's latest rate hike and prospects for further policy tightening.
Spot gold was up 1.1% at $4,308.57 per ounce, as of 1022 GMT, after hitting a near-six-week low on Wednesday. U.S. gold futures for December delivery were down 0.9% to $4,348.10.
"I suspect the market may have gotten itself over-positioned on the expectation of a rate hike, as the likelihood grew. And now that it's happened, those positions are being squared out," independent analyst Ross Norman said.
Meanwhile, the dollar eased from a seven-week high, making greenback-priced bullion more affordable for holders of other currencies, while oil prices extended their fall on diminishing fears of supply disruptions.
The Fed raised rates on Wednesday and flagged more hikes in the coming months, with new chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration's inability so far to control inflation that policymakers worry could worsen.
Although gold is considered an inflation hedge, a high-interest-rate environment reduces its appeal by boosting the attractiveness of interest-bearing assets.
The Bank of England looks set to keep rates on hold on Thursday, while the Bank of Japan could raise interest rates to a 31-year high on Friday.
"The Fed is tightening policy at a time when inflation is being driven primarily by energy prices and supply shocks, meaning higher interest rates could weaken growth without quickly resolving all price pressures," said Linh Tran, market analyst at XS.com.
"This environment remains supportive of demand for gold as a hedge, particularly while geopolitical uncertainty persists."
On the geopolitical front, U.S. President Donald Trump said he hoped an end to the war against Iran was near, as the conflict escalated with Saudi aircraft pounding Yemen and Houthi fighters launching drones and missiles at Saudi cities.
Spot silver rose 1.5% to $63.91 per ounce, platinum gained 1.2% to $1,772.26 and palladium climbed 1.4% to $1,287.17.
Reporting by Pablo Sinha and Ashitha Shivaprasad; Editing by Janane Venkatraman
