Hat of iron character (3)
I believe the answer is:
fez
'hat' is the definition.
(fez is a kind of hat)
'iron character' is the wordplay.
'iron' becomes 'fe' (Fe is the chemical symbol for iron).
'character' becomes 'z' (**).
'fe'+'z'='FEZ'
'of' acts as a link.
(Other definitions for fez that I've seen before include "Tasselled hat" , "Hat - Moroccan city" , "Egyptian tasseled hat" , "Flat-topped red cap with tassel worn by Muslim men" , "Egyptian felt cap" .)