Gold drops to $4,282 as Fed tightening looms

Traders expecting another US Federal Reserve rate increase pushed spot gold down 2% to $4,281.98 an ounce on Thursday, Mettis Global reported. Silver slipped 0.6% to $64.07 an ounce, while platinum gained 0.2% to $1,754.05 and palladium eased 0.1% to $1,260.70. Lower oil prices helped limit the losses in bullion somewhat.

The Fed lifted its benchmark rate by 25 basis points last week, to a range of 3.75% to 4.00%. According to CNBC, stronger growth and climbing inflation are pushing the central bank toward another increase just before key national elections, with traders heavily positioned for a second straight hike in late October. Higher interest rates tend to make bullion less attractive since it generates no interest income, even though it is often treated as a hedge against inflation.

Wednesday data showed US business activity in September reached a peak not seen in over five years, though strong demand also stretched supply chains and lifted prices. Oil edged lower after Iran signalled willingness to keep talking, yet both parties remain distant over the route to a settlement.