Gold muted on Fed policy tightening bets, decline in oil

Among other metals, spot silver XAG= fell 0.4% to $64.23 per ounce, platinum XPT= rose 0.3% at $1,755.69 and palladium XPD= gained 0.7% to $1,269.46.

Oil prices edged lower as Iran said it remained open to diplomacy to end the US-Iran war, though the two countries remain far apart on ways to do so. O/R

While gold is widely regarded as an inflation hedge, rising interest rates tend to diminish its appeal relative to interest-bearing investments.

US business activity raced to a more than five-year high in September, data on Wednesday showed, though strong demand strained supply chains and pushed prices higher.

"In our baseline scenario, we expect precious metals to lack clear direction, although volatility is likely to remain high. Gold could continue to trade for a couple of quarters near an average of $4,200 per ounce," Intesa Sanpaolo economist Daniela Corsini said in a note.

Sept. 24 (Reuters) - Gold on Thursday was sandwiched between market expectations of further Federal Reserve policy tightening, which pressures the non-yielding metal, and a decline in oil prices that helped limit losses.

Spot gold XAU= was little changed at $4,291.48 per ounce, by 0512 GMT. US gold futures GCcv1 for December delivery rose 0.2% to $4,326.30.

Mounting US inflation pressures and a strengthening economy appear to be pushing the Fed towards a rate hike on the eve of critical national elections, with traders piling into bets on a second straight policy tightening in late October. FEDWATCH

"Investors are currently focused on the Fed's higher-for-longer stance following last week’s rate increase, fluctuations in the US dollar and Treasury yields, and Middle East developments related to oil and energy supply risks," said Ross Maxwell, chief strategy officer, VT Markets. USD/ US/