Gold gains on softer oil prices; Fed decision in focus

Gold prices edged higher on Monday as softer oil prices tempered inflation concerns, while investors awaited the Federal Reserve’s policy decision later this week.

Spot gold rose 0.4% to $4,009.87 per ounce by 0342 GMT, after hitting its lowest level since mid-July in the previous session.

Bullion posted a 4% weekly fall on Friday, its steepest weekly decline since June.

US gold futures for December delivery gained 0.4% to $4,023.50.

“The jump that we’ve seen is mostly symptomatic of the kind of relief provided by a lower oil price, but one that could easily be capped as markets position for the FOMC decision in a couple of days’ time,” said Kyle Rodda.

“Gold will continue to trade as a function of interest rate expectations and geopolitical risks.”

Oil prices fell on Monday after surging to near six-month highs late last week, although ongoing attacks on Saudi Arabia kept supply concerns in focus.

Qatari mediators were in Tehran on Sunday to help de-escalate regional tensions in coordination with the United States, an official briefed on the situation told Reuters.

Markets await the Fed’s policy meeting on October 28.

The US Personal Consumption Expenditures (PCE) data, a key gauge closely watched by the central bank as it targets a 2% inflation rate, is due the next day.

Traders largely expect the central bank to leave rates unchanged this week, while expectations for a hike in December are at 75%, according to CME’s FedWatch Tool.

Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish non-yielding bullion’s appeal to investors.

Meanwhile, US business activity slowed modestly in October, though robust demand allowed companies to raise prices for goods and services, a sign that inflation could increase further and remain persistently high in the coming months.

Among other metals, spot silver rose 0.6% to $54.19 per ounce, platinum steadied at $1,551.31 and palladium gained 0.6% to $1,050.50.