Gold muted as Fed policy tightening prospects weigh

On Thursday, gold prices remained relatively stable as the Federal Reserve's prospects of further policy tightening weighed on the precious metal. Spot gold fell by 0.1% to $4,281.98 per ounce at 0155 GMT. US gold futures for December delivery were essentially unchanged at $4,317.50. Analysts noted that investors were closely watching 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.

A clearer signal of another rate hike could potentially pressure gold prices lower. Oil prices dipped as Iran expressed openness to diplomacy to end the US-Iran conflict, although the two nations are still far apart on potential solutions. The US central bank recently raised its benchmark interest rate by 25 basis points to 3.75%-4.00%.

Rising inflation pressures and a strengthening economy seem to be pushing the Fed towards another rate hike before the crucial national elections. While gold is traditionally seen as a hedge against inflation, higher interest rates make it less attractive compared to interest-bearing investments. Recent data revealed that US business activity surged to a five-year high in September, yet strong demand strained supply chains, resulting in higher prices.

Intesa Sanpaolo economist Daniela Corsini stated that precious metals are expected to lack clear direction in her baseline scenario, with volatility likely to remain high. Gold could potentially trade near an average of $4,200 per ounce for a few quarters. Among other metals, spot silver declined by 0.6% to $64.07 per ounce, platinum rose by 0.2% to $1,754.05, and palladium fell by 0.1% to $1,260.70.