Gold pressured by Fed rate expectations
On Thursday, bullion trading was subdued, with the prospect of additional tightening by the Federal Reserve weighing on sentiment, although softer crude prices provided a measure of cushion. As of 0155 GMT, spot gold had slipped 0.1% to $4,281.98 an ounce. December-delivery US gold futures were nearly flat, quoted at $4,317.50.[S1]
Ross Maxwell, chief strategy officer at VT Markets, noted that market participants are presently watching the Fed's commitment to keeping rates elevated after last week's increase, along with swings in the dollar and Treasury yields, plus Middle East tensions tied to oil and energy supply concerns. In his view, any firmer indication of an additional rate increase would drag gold prices down.[S1]
Oil edges lower as Iran signals openness to diplomacy
Crude prices slipped modestly after Iran signaled it was still willing to pursue diplomacy aimed at halting the US-Iran war, even though the two sides remain deeply divided over how to achieve that. Last week the US central bank lifted its benchmark rate by 25 basis points, bringing it to 3.75%-4.00%. With inflation pressures building and the economy strengthening, the Fed appears headed toward another hike just before pivotal national elections, and traders are heavily betting on a second consecutive tightening in late October.[S1]
Although gold is commonly viewed as a hedge against inflation, higher interest rates typically make it less attractive compared with investments that pay interest. Figures released Wednesday indicated US business activity climbed to its strongest level in more than five years during September, but robust demand stretched supply chains and drove prices upward.[S1]
Outlook and other metals
Daniela Corsini, an economist at Intesa Sanpaolo, wrote in a note that under their base case, precious metals are expected to move without a clear trend, even as volatility probably stays elevated. Gold may keep trading around an average of $4,200 an ounce for a couple of quarters. Elsewhere, spot silver dropped 0.6% to $64.07 an ounce, platinum gained 0.2% to $1,754.05, and palladium shed 0.1% to $1,260.70.[S1]
