Gold lacklustre as higher-for-longer rate outlook weighs on sentiment

NEW YORK: Gold prices eased on Wednesday as investors weighed the prospect of major central banks keeping interest rates elevated for longer in their efforts to curb persistent inflation.

Spot gold fell 0.2 per cent to US$4,345.99 per ounce, as of 0147 GMT. US gold futures for December delivery were up 0.2 per cent at US$4,382.70.

The dollar steadied near its strongest level in two months. A firmer dollar makes greenback-priced bullion more expensive for overseas buyers.

"Short-term volatility in gold very much depends on how oil trades and the developments that happen in the Middle East. However, long-term structural drivers for gold are still really strong," said Kyle Rodda, senior financial market analyst at Capital.com.

While bullion is often seen as a safeguard against inflation, its appeal tends to wane when elevated rates boost returns on interest-bearing investments.

US President Donald Trump warned that he could annihilate Iran if there is no deal to end the war, but also suggested an agreement could come soon amid a diplomatic push at the United Nations.

Boston Federal Reserve President Susan Collins wrote in a Linkedin post that she supported the US central bank's decision last week to raise interest rates in the face of risks that future inflation will be above the 2 per cent target. Collins, who is not a voting member of the rate-setting Federal Open Market Committee this year, did not say if she wants rates to go up again.

The Fed last week lifted its benchmark rate by 25 basis points to 3.75 per cent-4.00 per cent and signalled another increase could come before year-end. The Bank of Japan and the European Central Bank have also raised rates recently.

Analysts at BMI maintained their 2026 gold price forecast at an average of US$4,400 per ounce, noting that elevated geopolitical risks and continued central bank purchases are expected to ensure a strong floor under gold around the US$3,800 level.

Among other metals, spot silver fell 0.4 per cent to US$66.78 per ounce, platinum lost 0.8 per cent to US$1,818.21 and palladium declined 0.4 per cent at US$1,302.61.