NEW YORK: Gold shed more than 2% in early trade in New York on Thursday, precipitating a sell-off across precious metals with palladium set for its worst day in over a year, as the dollar gained ground after the US Federal Reserve struck a hawkish tone on monetary strategy.

Spot gold fell 2% to $1,776.10 per ounce by 1:44 pm EDT (1744 GMT), having earlier touched its lowest since May 3 at $1,766.29.

US gold futures settled down 4.7% at $1,774.80.

A majority of 11 Fed officials on Wednesday projected at least two quarter-point rates rise for 2023, although officials pledged to keep policy supportive for now to encourage a jobs recovery.

The announcement propelled the dollar to an over two-month high, eroding bullion’s allure for those holding other currencies, and drove a jump in US Treasury yields, raising the opportunity cost of holding non-yielding gold.

“The Fed’s dot plot is providing a clear change in tone, ultimately suggesting that although the Fed continues to reiterate that inflation is transitory, their formal assessment of risks to the economy is decisively more hawkish,” TD Securities commodity strategist Daniel Ghali said.

Weakening physical demand and slowing speculative flows into gold, both of which began before the Fed meeting, could also help to drive a further pullback, Ghali added.

Adding to gold’s headwinds, the US central bank said it would consider whether it should taper its asset purchases at every subsequent policy meeting.

Jeffrey Christian, managing partner at CPM Group, also said the scale of gold’s sell-off was accentuated by bearish technicals, and that the steeper decline in gold futures “reflects the fact that you have more trading volume and more technically oriented investors in the futures market than in spot.”

Palladium led the sell-off, tumbling 10% to $2,517.18, while platinum fell 6.6% to $1,048.44.

Palladium could be seeing a correction in a rally that some view as overdone, Christian added.

Silver slipped 4.3% to $25.81 per ounce.