PRECIOUS-Gold hits over 3-wk low; strong dollar, Fed rate hike view weigh

    * Spot gold may fall more towards next support at $1,281/oz
    * Fed signals one more rate hike this year

 (Updates prices)
    By Apeksha Nair
    Sept 21 (Reuters) - Gold slipped to its lowest in over three
weeks on Thursday as a stronger dollar and increasing prospects
of a December rate hike by the Federal Reserve curbed appetite
for the metal. 
    Spot gold        was down 0.2 percent at $1,298.06 an ounce
by 0634 GMT, after earlier touching its lowest since late August
at $1,294.41.  
    U.S. gold futures         for December delivery dropped
nearly 1.2 percent to $1,301.20 an ounce.
    The U.S. dollar rose and bond yields jumped to their highest
levels in six weeks on Wednesday after the Federal Reserve
announced a plan to start shrinking its balance sheet in October
and signalled one more rate hike later this year.      
    The dollar on Thursday extended gains and rose 0.2 percent
versus the yen        . It was steady against a basket of
currencies       . 
    "The Federal Open Market Committee (FOMC) was surprisingly
upbeat and (held) the line on rate hikes in 2017 and 2018 which
has caught traders by surprise," said Jeffrey Halley, a senior
market analyst at OANDA.
    The Fed's announcement on another interest rate hike this
year took markets by surprise as a series of poor inflation
readings had dampened expectations for such a step.
    Higher interest rates tend to boost the dollar and push bond
yields up, putting pressure on greenback-denominated,
non-yielding bullion. 
    Elsewhere, the Bank of Japan kept monetary policy steady on
Thursday and maintained its upbeat view of the economy,
signalling its conviction a solid recovery will gradually
accelerate inflation towards its 2 percent goal without
additional stimulus.             
    "In the bigger picture, I still see the price action as
corrective. It should base in this $1,280-$1,296 region. I see
global uncertainty, diversification as continuing to underpin
gold for now," Halley said.     
    U.S. allies on Wednesday said that enforcing international
sanctions on North Korea, and not mere dialogue, was key to
getting Pyongyang to give up its nuclear weapons after President
Donald Trump on Tuesday said he would "totally destroy" the
country if threatened and mocked its leader as a "rocket man".
    Geopolitical risks can boost demand for safe-haven assets
such as gold.
    Spot gold may break support at $1,299 per ounce and fall
more towards the next support level at $1,281, said Reuters
technicals analyst Wang Tao.                    
    In other precious metals, silver        was down 0.5 percent
at $17.04 an ounce, after falling to its lowest since Aug. 25 in
the previous session.
    Platinum        eased 0.3 percent to $938.49 an ounce, after
hitting its lowest since late July on Wednesday.
    Palladium        rose 0.2 pct to $911.50 an ounce, and was
moving away from its previous session's five-week low.

 (Reporting by Apeksha Nair in Bengaluru; Editing by Joseph
Radford and Subhranshu Sahu)