Precious metals on the London spot market trended higher overnight in a volatile session. The Federal Reserve's September rate hike has been delivered, and the dot plot signaled a hawkish stance, hinting at the possibility of further increases this year. However, the US dollar index reversed its gains after hitting a six-week high, providing some relief to bullion.

Elsewhere, reports that Saudi Arabia is seeking a peace proposal helped ease geopolitical tensions, triggering a sharp drop in crude oil prices. This decline in energy costs dampened inflation expectations, offering additional support to gold prices. In the near term, gold is showing a mildly bullish bias, with traders now awaiting the Bank of Japan's rate decision on Friday and monitoring weekend geopolitical developments.

On the macro front, US initial jobless claims fell to 196,000, a decrease of 10,000 from the prior week, marking one of the lowest readings since 1969. Continuing claims also declined to 1.73 million, the lowest level since January 2024. These figures underscore that the US labor market remains robust and resilient.

Following the Fed's rate hike, the Bank of England chose to hold its rate steady at 3.75%, yet shifted its policy language in a more hawkish direction. Meanwhile, President Trump noted that he spoke with Waller before the decision and voiced support for the Fed governor's choice.

On the geopolitical front, Saudi Arabia has proposed a two-week ceasefire to the Houthi rebels via Oman. The Houthis have responded cautiously, insisting on a "final and comprehensive" resolution instead.

In yesterday's trading, the market swiftly absorbed the negative impact of the Fed's hike, with prices rebounding from session lows. Although the Fed has signaled further tightening this year, market participants view this as a "reactive hike" constrained by economic conditions and US Treasury dynamics. Under this interpretation, gold may stand to benefit from the evolving landscape.