Gold rises on softer oil; markets parse Fed signals

Gold prices rebounded on Monday after a previous day's decline, as lower oil prices eased inflation worries. Investors were also examining comments from the Federal Reserve for insights into the direction of US interest rates. Spot gold increased by 0.9% to $3,907.94 per ounce by 0633 GMT, following a one-year low the previous session.

US gold futures for December delivery rose 0.5% to $3,916.70. Bullion had plummeted 3.5% to a one-year low on Friday, falling below its $4,000 per ounce threshold due to a technology stock sell-off leading to margin calls and the liquidation of safe-haven assets like gold. Analyst Kyle Rodda noted that the rally was merely a bounce from the sell-off, with oil prices easing at the beginning of the week providing some relief to precious metals.

Oil prices had dropped over 3% after reports emerged that Iranian negotiators were in Doha for three consecutive days of talks with Qatari mediators to secure a deal to end the US-Israeli war on Iran. Elevated energy costs typically suggest the Fed will maintain higher interest rates for longer, raising the opportunity cost of holding non-yielding bullion.

Investors are now concentrating on the November 3 US midterm elections and their potential influence on fiscal policy and market sentiment. Fed officials made the case for additional interest rate hikes on Friday to combat high inflation, in the first round of comments from central bankers following last week's monetary policy meeting.

Gold faces a challenging near-term outlook, with technical selling and liquidity concerns outweighing its long-term investment potential, according to Saxo Bank's head of commodity strategy, Ole Hansen. Silver prices climbed 2.2% to $50.16 per ounce, platinum increased 0.3% to $1,435.34, and palladium rose 0.9% to $984.79.