Gold off three-month lows as oil rally fans inflation worries

Gold edged slightly up from a three-month low hit earlier on Friday and is on track for its steepest weekly loss since June, as rising oil prices fuelled higher-for-longer Federal Reserve rate expectations and pressured the non-yielding precious metal. Spot gold was at $4,026.15 per ounce by 0936 GMT after earlier dropping to $3,986.50, its lowest level since July 20. Bullion has lost 3.5% so far this week, the second consecutive weekly loss. US gold futures for December delivery fell 0.5% to $4,040.70 per ounce. "The rise in oil prices could result in real interest rates remaining higher for longer, which would reduce the relative attractiveness of investing in and holding gold," Hamad Hussain, climate and commodities economist at Capital Economics, said. Brent crude touched a more than five-month high on Friday, after Houthi attacks in Saudi Arabia stoked concern over further disruption to energy supplies. Rising oil prices can stoke inflation, prompting investors to scale back Fed rate-cut bets. Market expectations of a rate hike at the Fed's Oct 27–28 meeting are at 9%, while it is 81% for December, according to CME's FedWatch Tool. Investors are also awaiting US Personal Consumption Expenditures data, the Fed's preferred inflation gauge, on October 29 for fresh clues on progress toward its 2% target. The European Central Bank meets on Thursday against a backdrop of upheaval in France and an Iran war that is keeping energy prices above $100, meaning inflation risks remain elevated. Among other metals, spot silver slid 1.2% to $53.8882 per ounce, and palladium dropped 0.3% to $1,051.06, hitting their lowest since November 2025 and June 2025 respectively. Spot platinum fell 0.8% to $1,557.03 per ounce, its lowest since July. All three metals were headed for weekly declines.