NEW YORK: Gold eased on Tuesday as firmer oil prices fuelled inflation concerns, while investors awaited next week’s Federal Reserve meeting for further direction on US interest rates. Spot gold fell 0.51 percent to USD4,118.76 per ounce by 0859 am EDT (1259 GMT). US gold futures for December delivery dropped 0.55 percent to USD4,137.20 per ounce.
“Oil is over USD100, so I think basically the story this morning is just a stronger, higher-priced oil is putting pressure on precious metals,” said Bob Haberkorn, senior market strategist at StoneX. Oil prices advanced on Tuesday, with Brent hovering around a five-month high as traders priced in geopolitical risks from Houthi attacks on Saudi infrastructure and reports of vessel attacks in the Gulf.
Gold is still down around 26.4 percent from its record high of USD5,594.82 in January and roughly 22 percent from levels at the start of the Iran war, when concerns over energy inflation reinforced bets on interest rate hikes.
The Fed raised interest rates by a quarter point in September, its first hike this year. While recent comments from Fed officials signalling little urgency for further policy tightening have tempered expectations of a rate hike at the central bank’s October 27-28 policy meeting, traders see a 92 percent chance of a hike in December, according to CME’s FedWatch Tool. Gold is traditionally seen as an inflation hedge, but it loses its appeal as a non-yielding asset in a high-interest-rate environment.
Investors are also watching next week’s US Personal Consumption Expenditures (PCE) data, the Federal Reserve’s preferred inflation gauge, for clues on whether inflation pressures remain persistent and how that could shape the rate outlook.
Elsewhere in Japan, central bank Governor Kazuo Ueda said underlying inflation was “quite close” to the 2 percent target, signalling scope for further rate hikes.
Among other metals, spot silver was steady at USD57.08 per ounce, platinum fell 0.29 percent lower to USD1,635.48 per ounce and palladium dropped 1.54 percent to USD1,102.45 per ounce.