Gold muted as Fed policy tightening prospects weigh

Gold prices remained relatively steady on Thursday, affected by expectations of additional Federal Reserve policy tightening, although a decrease in oil prices provided some relief. As of 0155 GMT, spot gold was trading at $4,281.98 per ounce, while US gold futures for December delivery were nearly unchanged at $4,317.50.

Investors are closely monitoring the Federal Reserve's "higher-for-longer" stance, which has emerged following last week's interest rate increase, fluctuations in the US dollar, and rising Treasury yields. Moreover, Middle East developments concerning oil and energy supply risks further complicate market sentiment, according to Ross Maxwell, chief strategy officer at VT Markets.

The prospect of another rate hike would likely exert downward pressure on gold prices. The US central bank recently raised its benchmark interest rate by 25 basis points to a range of 3.75%–4.00%, driven by mounting inflation pressures and a strengthening economy. Traders are increasingly positioning themselves for a second consecutive policy tightening in late October, as national elections loom.

Gold is typically viewed as a hedge against inflation; however, higher interest rates can diminish its appeal compared to interest-bearing investments. In the baseline scenario projected, precious metals are expected to remain relatively directionless for the next few quarters, with volatility likely to persist. Analyst Daniela Corsini from Intesa Sanpaolo forecasts that gold may hover around an average price of $4,200 per ounce for the next couple of quarters.

Other precious metals experienced minor fluctuations. Spot silver dropped 0.6% to $64.07 per ounce, platinum rose slightly by 0.2% to $1,754.05 per ounce, and palladium declined marginally by 0.1% to $1,260.70 per ounce.