Gold drops over 1% as oil rally reinforces higher-for-longer rate outlook

Gold prices lost ground on Thursday as rising oil prices sharpened inflation concerns and strengthened expectations that borrowing costs could remain elevated. Business Recorder reported that spot gold was down 1.1% at $4,094.90 an ounce by 0333 GMT, its weakest level since October 14, while US December futures declined 0.9% to $4,111.40.

The oil advance followed further Houthi attacks in Saudi Arabia and a US order for some diplomatic staff and relatives to leave missions in the Kingdom. Traders are assigning a 16% probability to a rate increase at the Federal Reserve meeting on October 27-28, compared with a 90% likelihood of a December increase, according to CME’s FedWatch Tool. Markets are also awaiting US PCE inflation figures, while higher rates can make non-yielding gold less attractive. Silver, platinum and palladium also fell.