Gold muted as Fed policy tightening prospects weigh

Gold prices were ‌muted on Thursday, pressured by expectations of further Federal Reserve policy tightening, though a dip in oil prices offered some support.

Spot gold was down 0.1% at $4,281.98 per ounce, as of 0155 ​GMT. US gold futures for December delivery were little changed at $4,317.50.

“Investors are ​currently focused on the Fed’s higher-for-longer stance following last week’s ⁠rate increase, fluctuations in the US dollar and Treasury yields, and Middle East ​developments related to oil and energy supply risks,” said Ross Maxwell, chief strategy officer, ​VT Markets.

“A clearer signal of another rate hike would pressure gold lower.”

Oil prices edged lower as Iran said it remained open to diplomacy to end the US-Iran war, though the two ​countries remain far apart on ways to do so.

The US central bank last ​week increased its benchmark interest rate by 25 basis points to 3.75%-4.00%. Mounting inflation pressures and a strengthening ‌economy ⁠appear to be pushing the Fed towards a rate hike on the eve of critical national elections, with traders piling into bets on a second straight policy tightening in late October.

While gold is widely regarded as an inflation hedge, rising ​interest rates tend ​to diminish its ⁠appeal relative to interest-bearing investments.

Data on Wednesday showed that US business activity raced to a more than five-year high in ​September, though strong demand strained supply chains and pushed prices ​higher.

“In our ⁠baseline scenario, we expect precious metals to lack clear direction, although volatility is likely to remain high. Gold could continue to trade for a couple of quarters near ⁠an ​average of $4,200 per ounce,” Intesa Sanpaolo economist Daniela ​Corsini said in a note.

Among other metals, spot silver fell 0.6% to $64.07 per ounce, platinum rose 0.2% at $1,754.05 and ​palladium lost 0.1% to $1,260.70.