Gold slipped on Monday as a firmer dollar and higher oil weighed on sentiment. Traders now look to U.S. inflation data due later in the week for cues on Federal Reserve policy.
Spot gold dipped 0.5% to settle at $4,171.77/oz, while gold futures settled just above the flatline at $4,196.95/oz. A firmer dollar and a rise in oil weighed on the metal, according to Investing.com.
Inflation reports could reset Fed rate bets
The September U.S. consumer price index (CPI) and producer price index (PPI) reports arrive on Wednesday and Thursday, respectively. Components from both feed into the Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index.
Recent economic data led to a sharp recalibration in Federal Reserve rate hike expectations, especially for October. Clark Bellin of Bellwether Wealth said Wednesday's CPI is likely to show elevated inflation because of rising energy prices, and that inflation remains well above the Fed's 2% target.
Investment and central bank demand back gold
Analysts at ANZ said gold's recent performance had been supported by rising investment demand, with inflows into gold-backed exchange-traded funds reaching a four-year high, according to Bloomberg data. The People's Bank of China added 740,000 ounces to its reserves in September, extending its buying streak to 23 consecutive months.
However, ANZ cautioned that inflation risks could limit further gains if they prompt the Fed to tighten policy further. Higher interest rates remain a concern for gold because yield-bearing assets become more attractive when borrowing costs rise.
Oil climbs after deadly attack in Riyadh
Oil rose on Monday amid increased supply disruption fears following a deadly Saturday attack by Iran-backed Houthis on King Khalid International Airport in Riyadh that killed 13 people. President Donald Trump told reporters Washington "may" join Saudi Arabia in air strikes against the Houthis.
Brent crude futures settled 1.4% higher at $106.15 a barrel.
Source: Investing.com
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