Gold Edges Down to $4,281.98 as Fed Rate Hike Expectations Mount

Gold prices edged lower on Thursday, falling 0.1% in spot trading to $4,281.98 per ounce. U.S. gold futures for December delivery held steady at $4,317.50 per ounce.

Fed Policy Tightening Weighs on Bullion

Ross Maxwell, Chief Strategy Officer at VT Markets, stated that investors are now focused on the Federal Reserve’s signal to keep interest rates elevated for an extended period following last week’s hike. He cited concurrent movements in the U.S. dollar, Treasury yields, and developments in the Middle East tied to oil and energy supply risks.

Maxwell added that a clearer indication of another rate increase would exert further downward pressure on gold prices.

Inflation and Economic Resilience Fuel Rate Hike Bets

Rising inflationary pressures and economic resilience are reinforcing market expectations of a further Federal Reserve rate hike ahead of the pivotal midterm elections. According to the CME Group’s FedWatch Tool, traders are increasingly pricing in a second consecutive tightening move by late October.

U.S. Business Activity Surges to Multi-Year High

S&P Global reported on Wednesday that its preliminary U.S. composite purchasing managers’ index (PMI) — a closely watched gauge of business activity — jumped this month to its highest level since July 2021. The firm’s input prices index also rose to its highest reading in approximately four years.

Outlook: Gold Range-Bound Near $4,200

Daniela Corsini, Economist at Intesa Sanpaolo, noted in a research note that the bank’s base-case scenario points to a lack of clear directional momentum for precious metals, with volatility remaining elevated. She projected gold will likely trade near a two-month average of around $4,200 per ounce over the coming quarters.

Other Precious Metals Mixed

Among other precious metals, silver declined 0.6% in spot trading to $64.07 per ounce. Platinum gained 0.2% to $1,754.05, while palladium fell 0.1% to $1,260.70 per ounce.