Gold edges higher on softer oil; Fed rate outlook in focus

Gold prices rose slightly on Monday as lower oil prices provided support and investors looked into the Federal Reserve's potential interest rate hike later this year. Spot gold increased by 0.3% to $4,175.60 per ounce, while US gold futures for December delivery climbed 0.4% to $4,196.40.

Tim Waterer, chief market analyst at KCM Trade, noted that gold is showing a modest rise at the beginning of the week and responds favorably to the softer tone in oil prices, considering the inflation aspect. In the short term, a more persistent drop in oil prices or a clearer downward trend in yields would be the most favorable triggers for gold, as both factors would ease inflation and rate concerns.

Oil prices fell on Monday following US President Donald Trump's decision to waive sanctions and tariffs on Russia, which could result in increased Russian fuel exports. Meanwhile, US import prices rose higher than anticipated in September, driven by increased energy product costs and various goods, indicating a continued rise in inflation pressures due to the ongoing Middle East conflict.

Market participants are now awaiting the Federal Open Market Committee's meeting on US interest rates and the Personal Consumption Expenditures (PCE) data expected next week. The US central bank uses PCE price measures to gauge its 2% inflation target.

According to the CME's FedWatch Tool, traders see a 16% chance of a rate hike this month and a 92% probability of an increase in December. Gold, usually seen as a hedge against inflation, may lose its appeal if interest rates rise, as the non-yielding asset would become less attractive. In other metals, spot silver increased by 0.9% to $57.54 per ounce, platinum rose by 0.7% to $1,642.29, and palladium climbed by 1.5% to $1,129.13.