Gold was on track for its biggest weekly drop in nearly four months on Friday, after demand for the safe-haven metal was hit by hopes of progress in peace talks between Russia and Ukraine as well as the fallout from a U.S. interest rate hike.

Spot gold was down 1.14% to $1,920.56 per ounce, weighed down by a stronger dollar. U.S. gold futures settled down 1.2% to $1,919.60.

The dollar jumped against its rivals, making bullion more expensive for overseas buyers.

“We have seen the invasion-driven momentum and speculative fury (for gold) massively cool off over the past 10 days,” said David Jones, chief market strategist at Capital.com.

Bullion is down 2.8% this week as optimism over the peace talks lifted sentiment in wider financial markets, denting demand for safe-haven assets.

“If there is a ceasefire or some sort of a deal, gold could drop fairly quickly,” said Edward Meir, analyst with ED&F Man Capital Markets.

Earlier this week, the Federal Reserve raised its benchmark overnight interest rate by a quarter of a percentage point and forecast an aggressive plan to push borrowing costs to restrictive levels next year.

Higher interest rates tend to raise the opportunity cost of holding non-interest paying gold.

However, Standard Chartered analyst Suki Cooper said in a note that the hawkish U.S. central bank did not derail the positive sentiment towards gold and that current geopolitical risk had raised inflation concerns, reigniting longer-term interest in bullion.

“While the physical market has come under pressure, growth in investor interest has more than offset this weakness for now, suggesting that volatile price action is here to stay,” Cooper added.

Spot palladium eased 0.59% to $2,495.45 per ounce and was set for a weekly fall of more than 10% as fears about supply from top producer Russia eased.

Spot silver slipped 1.7% to $24.90, while platinum rose 0.23% to $1,023.16.