Gold slips as Mideast attacks fan inflation concerns; US midterms in focus

Gold prices eased on Tuesday as renewed gains in oil prices fanned inflation concerns and reinforced expectations of higher interest rates, while investors awaited the outcome of US midterm elections for clues on the broader market outlook. Spot gold slipped 1% to $3,908.49 per ounce by 0830 GMT after surging more than 2% on Monday to rebound from a one-year low hit on Friday. US gold futures for December delivery dropped 1.3% to $3,917.90. "Gold's recovery efforts have been somewhat curtailed by oil’s rebound as risk premium returns to the market. For gold to properly turn the corner, it will likely need a convincing push back above $4,000," said Tim Waterer, chief market analyst at KCM Trade. Oil prices rose more than $1 on Tuesday after a report that the United States had struck Iran's Qeshm Island, raised concerns of an escalation in the eight-month conflict and prolonged disruptions to Middle East oil supplies. Elevated energy prices raise expectations that the Federal Reserve will keep interest rates higher for longer, increasing the opportunity cost of holding non-yielding bullion. Traders currently see a 75% chance that the central bank will raise rates in December, according to CME's FedWatch tool. In the US, crucial midterm elections get underway later in the day. "A Democratic sweep would likely prove more problematic for the AI data-centre build-out and the broader tech trade. Any further pressure on the tech complex from increased regulatory scrutiny could spill over into gold as positions continue to be cut to cover losses elsewhere," Waterer said. Meanwhile, the World Gold Council cut its forecast for growth in gold investment this year to 200 metric tons from 400 tons previously, citing weaker appetite for bars and coins, although it raised its estimate for central bank purchases. Among other metals, spot silver slipped 3.2% to $49.00 per ounce, platinum fell 1.6% to $1,425.50 and palladium dropped 3.2% to $938.50.