Precious metals contracts took an intraday hammering on Thursday (15 December) dragged lower by gold and silver futures, as the US Federal Reserve opted to raise the country's benchmark interest rates by 0.25% overnight in line with market expectations.

In a decision taken after the close of European markets, the US central bank's Federal Open Market Committee raised its rate target range from 0.25% to 0.5% to a range of 0.5% to 0.75%, and also approved a quarter-point increase in the discount rate from 1% to 1.25%. It sent the dollar soaring against all major currencies including the pound and euro.

Ahead of the Fed's decision on Wednesday (14 December), gold futures briefly rose to $1,163.60 an ounce at 6:02pm BST, up 0.40% or $4.60, with silver futures in tow at $17.20 an ounce, up 1.31% or 70 cents.

However, a massive selloff ensued as soon as Asian trading gathered pace on Thursday, followed by bearish morning calls in Europe, as gold and silver bore the brunt of short-calls, i.e. bets to the downside.

Dubai gold futures hit their lowest level since 1 February sliding to $1,136.40 an ounce, down nearly 2%. Worse was to follow intraday; by 11:02am GMT, the Comex gold February futures contract was down 2.75% or $32.00 to $1,131.70 an ounce, with market analysts issuing a "strong sell" call on the yellow metal.

FXTM chief market strategist Hussein Sayed said the Fed's hike, was largely priced in by the market but the central bank's forward guidance is taking its toll on commodities.

"We feel the 25 basis points increase was almost fully priced in and didn't take market participants by surprise, but the strong market reaction is due to the new Fed projections for 2017, which showed the central bank now expects three rate hikes for 2017 rather than only two factored in by the market in September."

Analysta at concurred. "It appears the Fed's hawkish stance over rate hikes in 2017 is what is impacting precious metals."

Kit Juckes, head of forex at Societe Generale, said: "Fed action was good for the dollar across the board, and conversely bad for dollar priced commodities. The price of gold is tumbling fast despite having held up better than the market expected in the last week or two."

Away from gold, the Comex silver contract for March delivery took an even steeper hit shedding 5.06% or 87 cents to $16.35 an ounce, as the combination of lower industrial demand and Fed action resulted in bearish calls.

Spot trades in the wider precious metals market also slid into negative territory, with spot platinum down 1.15% or $10.68 at $914.30 an ounce, and spot palladium down 0.11% or 51 cents to $722.45 an ounce.