Gold dips for fourth session as oil rally fans inflation concerns

Gold eased for a fourth straight session on Wednesday as higher oil prices stoked inflationary concerns, while investors looked ahead to next week’s Federal Reserve policy meeting for clues on the future path of interest rates.

Spot gold was down 0.1% at $4,119.37 per ounce by 0516 GMT, while

US gold futures for December delivery slipped 0.1% to $4,137.00.

“The metal could remain under some pressure as crude prices returned to the upside, keeping inflationary pressures in place and reinforcing hawkish monetary policy expectations,” said Bas Kooijman, CEO and asset manager of DHF Capital S.A.

Oil prices edged higher on Middle East supply concerns, with traders wary of Red Sea shipping risks and threats to oil infrastructure in Saudi Arabia.

“At this point, if some of these rate hikes that the markets have baked in for next year fall out of the forecast or at least downgrade in their likelihood, then that’s likely to send gold higher,” said Ilya Spivak, head of global macro at Tastylive.

The Fed will skip raising interest rates this month and deliver a hike in December, according to nearly all economists polled by Reuters, as policymakers signal patience even as stubborn inflation argues for a tougher response.

Expectations of a rate hike at the central bank’s October 27-28 policy meeting are as low as 15%, while traders still see an 88% chance of a hike in December, according to CME’s FedWatch Tool.

Higher interest rates typically weigh on gold prices because they increase the opportunity cost of holding the metal, which does not pay interest.

The US dollar index stabilised after recent losses, further weighing on bullion demand.

Markets are also waiting for US Personal Consumption Expenditures data next week, the Fed’s preferred gauge to monitor its 2% inflation target.

Among other metals, spot silver slid 1.1% to $57.35 per ounce, platinum fell 0.6% to $1,639.47 and palladium dropped 1% to $1,091.78.