Gold prices fell toward a one-week low during European morning hours on Wednesday, after an influential Federal Reserve policymaker jolted markets into higher expectations for a March U.S. interest rate hike.

Comex gold futures declined $9.75, or about 0.8%, to $1,244.15 a troy ounce by 3:15AM ET (08:15GMT), pulling further away from a three-and-a-half-month high of $1,264.90 reached earlier this week.

Spot gold was down $4.50 to $1,243.80 per ounce. The metal hit its highest since November at $1,263.95 on Monday.

New York Fed President William Dudley, among the most influential U.S. central bankers, said in an interview with CNN on Tuesday that the case for tightening monetary policy "has become a lot more compelling" and that he sees a rate hike in the "relatively near future".

Investors raised their outlook on a faster pace of U.S. rate increases following his comments.

Fed fund futures priced in about a 70% chance of a rate hike in March, according to Investing.com’s Fed Rate Monitor Tool, up from around 25% at the start of the week. Odds of a May increase was seen at 74%, while June odds were at around 85%.

More clues on interest rate hikes ahead of the central bank's March 14-15 meeting are expected to come Wednesday, when Fed Governor Lael Brainard speaks at 6:00PM ET.

Comments from Fed Chair Janet Yellen at the end of the week will also be in focus. The Fed chief is scheduled to speak on Friday.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up around 0.4% at 101.75 in London morning trade, its strongest level in almost two months.

Treasury yields shot up, with the U.S. 10-Year bond at around 2.410%, up from 2.358% on Tuesday.

The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.

Meanwhile, markets digested a speech by U.S. President Donald Trump to Congress overnight, which offered little details on his plans for infrastructure spending and tax reforms.

The president vowed to pursue massive tax relief for the middle class but stopped short of giving details.