Gold Tumbles Amid Fed Policy Tightening Prospects

Gold prices remained subdued as investors continued to focus on the prospect of further Federal Reserve policy tightening. The US central bank's decision last week to increase its benchmark interest rate by 25 basis points to 3.75%-4.00% has weighed heavily on gold, with expectations of another rate hike putting downward pressure on the precious metal.

Spot gold was down 0.1% at $4,281.98 per ounce, while US gold futures for December delivery were little changed at $4,317.50. Ross Maxwell, chief strategy officer at VT Markets, noted that a clearer signal of another rate hike would likely pressure gold lower.

The decline in oil prices offered some support to gold, with Iran indicating it remained open to diplomacy to end the US-Iran war. However, the two countries remain far apart on ways to do so. The prospect of further policy tightening and rising interest rates continues to make gold a less appealing investment option relative to interest-bearing assets.

Data released earlier this week showed that US business activity reached a more than five-year high in September, with strong demand straining supply chains and pushing prices higher. Intesa Sanpaolo economist Daniela Corsini expects precious metals to lack clear direction, although volatility is likely to remain high, with gold potentially trading near an average of $4,200 per ounce for the next couple of quarters.