Gold came under renewed pressure as higher oil prices revived inflation concerns and strengthened expectations that U.S. Interest rates could stay elevated.
Rising energy prices added to concern that inflation could remain persistent, limiting room for monetary easing and increasing the appeal of interest-bearing assets relative to gold, which does not pay income.
Brent crude traded near $110 a barrel amid tensions around the Strait of Hormuz and concerns about regional stability. Oil prices also rose after attacks by Houthi forces in Saudi Arabia prompted the United States to order some diplomats and their families to leave missions in the kingdom. The energy-market shock raised the prospect that higher fuel and production costs could feed into broader consumer prices.
Investors were preparing for the Federal Reserve’s October 27-28 policy meeting. Trading indicated an 84% probability that rates would remain unchanged at that meeting and a 90% chance of a December increase, while persistent inflation kept the possibility of a tighter policy response in focus. Upcoming personal-consumption expenditures data, along with economic readings from the United States, China, India and other major economies, was expected to provide additional signals.
Silver also weakened, though its moves were mixed across markets. Lower prices nevertheless supported festive buying in India during Dussehra, while physical demand in China remained steady despite softer jewelry spending.
The pressure on precious metals was partly offset by falling U.S. Treasury yields and a weaker dollar, which generally improve the appeal of bullion. The immediate direction, however, remained tied to oil prices, inflation data and signals from the Federal Reserve.