Gold edges higher as investors assess Fed rate-hike odds

Gold prices rose on Monday as weakening oil prices provided support, while investors focused on the Federal Reserve's potential interest rate hike later in the year and searched for further clues about the central bank's policy direction. Spot gold increased by 0.3% to $4,175.60 per ounce, while US gold futures for December delivery gained 0.4% to $4,196.40.

Tim Waterer, chief market analyst at KCM Trade, noted that "Gold is posting a modest rise to start the week. The metal is responding positively to the softer tone in oil prices from an inflation standpoint." He added that "In the near term, a more sustained decline in oil prices or a clearer move lower in yields would be the most constructive catalysts (for gold), as both would ease inflation and rate concerns."

Oil prices declined on Monday after US President Donald Trump lifted sanctions and tariffs on Russian fuel exports, potentially increasing Russian oil shipments. Meanwhile, US import prices rose more than anticipated in September, driven by higher energy and other goods costs, indicating persistent inflation pressures amid the Middle East conflict.

Market participants are now focusing on the Federal Open Market Committee's US interest rate meeting and upcoming Personal Consumption Expenditures (PCE) data, which the US central bank uses to gauge its 2% inflation target.

The CME's FedWatch Tool indicates a 16% chance of a rate hike this month and a 92% probability of an increase in December. Gold is traditionally seen as an inflation hedge, but rising interest rates diminish its attractiveness due to the lack of yield. Meanwhile, the European Central Bank may raise interest rates by 25 basis points again this year to combat inflation, according to the International Monetary Fund's latest report.

Other precious metals followed the trend, with spot silver up 0.9% to $57.54 per ounce, platinum gaining 0.7% to $1,642.29, and palladium rising 1.5% to $1,129.13.