Sept 24 (Reuters) - Gold prices eased on Thursday, hitting a one-week low, as a rise in oil prices and a hawkish shift in rhetoric anchored expectations of higher interest rates from the Federal Reserve.
Spot gold was down 0.9% at $4,249.37 per ounce as of 11:20 a.m. ET (1520 GMT), after having hit its lowest since September 16. US gold futures for December delivery lost 0.8% to $4,285.00.
"Gold continues to be burdened by higher energy prices along with higher interest rates... with higher energy prices, the expectation of inflationary concerns grows and the potential for additional rate hikes by the Fed," said David Meger, director of metals trading at High Ridge Futures.
Oil prices rose more than 1% as diplomatic talks between the US and Iran showed little sign of progress.
Energy prices can feed into headline inflation as manufacturers pass on higher costs. This forces central banks to adopt more restrictive policy stances to rein in price pressures.
The Fed raised interest rates for the first time in three years last week, and signalled further rate hikes this year. Several Fed officials reinforced the need for more rate increases, with Governor Michael Barr being the latest to highlight the need for tighter monetary policy.
Traders are now pricing a 66% chance of a rate hike in October, according to CME's FedWatch Tool. While gold is a traditional inflation hedge, rising interest rates tarnish its appeal.
Pressuring bullion, the dollar hit a two-month high, making greenback-priced gold more expensive for overseas buyers, while US 10-year Treasury yields hovered at a near two-decade high, increasing the opportunity cost of holding the non-yielding metal.
"Gold's recent support low around $4,235 is the first level to watch. A break could expose the market to a deeper correction and potentially renewed focus on the June-July area around $4,000," said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.
Spot silver fell 2% to $63.21 per ounce, platinum dropped 1.1% to $1,730.53, while palladium was steady at $1,260.54.
Updates for US mid-session trading
Reporting by Anjana Anil in Bengaluru; Editing by Diti Pujara
