Gold muted as higher-for-longer rate outlook weighs

Gold prices faced a lack of momentum on Tuesday as investors remained cautious, anticipating higher interest rates to persist for an extended period. As of 0151 GMT, spot gold was hovering around $4,344.29 per ounce, while US gold futures steadied at $4,381.80. Historically, gold has been considered a safeguard against inflation and geopolitical risks, but its allure often diminishes during periods of elevated interest rates when investors gravitate towards assets that generate yields.

With limited economic data from the US this week, traders are focusing on remarks from Federal Reserve officials for insights into whether the central bank may raise rates again in October. Chris Weston, head of research at Pepperstone, noted that while crude oil prices have slightly retreated from their recent peaks, a resurgence in prices that fuels inflation concerns could further exacerbate the negative outlook for gold.

The Federal Reserve recently increased its benchmark rate by 0.25% and signaled additional hikes in the months ahead. To combat inflation caused by robust demand and the lingering impact of a commodities price shock beyond oil, St. Louis Fed President Alberto Musalem suggested the Fed might need to implement more rate hikes. Geopolitical developments, such as Houthi rebels advancing in Yemen to control the Red Sea coast, have also added to market uncertainty.

Oil prices stabilized after a week of declines, with investors closely watching potential US-Iran negotiations at the United Nations General Assembly this week. Meanwhile, silver edged up by 0.3% to $66.19, platinum increased by 0.3% to $1,792.76, and palladium rose by 0.3% to $1,305.10.