Gold lacklustre as higher-for-longer rate outlook weighs on sentiment
Spot gold fell 0.2% to $4,345.99 per ounce, as of 0147 GMT
Gold prices dipped on Wednesday as central banks contemplated maintaining higher interest rates for an extended period to combat persistent inflation. Spot gold declined 0.2 percent to $4,345.99 per ounce, while US gold futures for December delivery rose 0.2 percent to $4,382.70. The US dollar steadied near its strongest level in two months, making dollar-priced bullion pricier for international purchasers.
Fluctuations in gold prices are heavily influenced by oil prices and Middle Eastern developments. However, fundamental factors supporting gold remain robust, according to Kyle Rodda, a senior financial market analyst at Capital.com. While gold is typically viewed as a hedge against inflation, its allure diminishes when elevated rates increase returns on interest-bearing assets.
US President Donald Trump threatened military action against Iran if no deal concludes the conflict, but also hinted at a potential agreement soon following diplomatic efforts at the United Nations. Susan Collins, President of the Boston Federal Reserve, expressed support for the US central bank's decision to raise interest rates amid concerns of future inflation surpassing the 2 percent target.
Collins, who does not participate in the rate-setting Federal Open Market Committee this year, did not specify whether she advocates for further rate hikes. The Federal Reserve recently increased its benchmark rate by 25 basis points to 3.75-4.00 percent, signaling a possible additional increase before the year ends. The Bank of Japan and the European Central Bank have also raised rates recently.
Analysts at BMI have retained their 2026 gold price forecast at an average of $4,400 per ounce, citing elevated geopolitical risks and ongoing central bank purchases as factors that will maintain a solid support level around the $3,800 mark. Silver prices fell 0.4 percent to $66.78 per ounce, platinum decreased 0.8 percent to $1,818.21, and palladium dropped 0.4 percent to $1,302.61.
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