Washington: Gold prices edged higher on Monday as lower oil prices eased inflation concerns ahead of next week’s Federal Reserve monetary policy meeting, where the central bank is widely expected to keep interest rates unchanged.
Spot gold rose 0.2% to $4,172.87 per ounce by 1109 GMT. US gold futures for December delivery gained 0.3% to $4,193.30 per ounce.
“Lower oil prices are easing pressure on the Fed, which is supportive for gold. What is notable is that gold is holding up even as the dollar strengthens, as demand for safe-haven assets is benefiting both,” said UBS analyst Giovanni Staunovo.
Oil prices slipped from a five-month high on Monday after US President Donald Trump waived sanctions and tariffs on Russia, a move that may lead to increased Russian fuel exports.
The drop in oil prices eased some inflation concerns following strong US CPI and PPI readings last week, driven in part by a surge in gasoline costs.
Investors are now awaiting next week’s Fed meeting and US PCE data, the central bank’s preferred measure of inflation.
“We expect the Fed to stay on hold this time, so the meeting itself may not be a major driver for gold. The key will be what the incoming inflation and labour-market data say about the path for rates,” Staunovo added.
According to CME’s FedWatch Tool, traders are pricing in only a 15% chance of a rate increase this month, while expectations for a December increase remain high at 89%.
While gold is typically considered a hedge against inflation, higher interest rates reduce the appeal of the non-yielding asset.
Elsewhere, the European Central Bank is likely to raise interest rates by 25 basis points at least once more this year to combat inflationary pressures, the International Monetary Fund said on Friday.
Among other metals, spot silver gained 1.2% to $57.6704 per ounce, platinum rose 1.3% to $1,652.22 per ounce and palladium climbed 2% to $1,134.25 per ounce.