Gold gains as oil, dollar retreat; investors brace for US inflation test

By Vishak Mathew

Oct 13 (Reuters) - Gold edged higher on Tuesday as oil prices and the US dollar retreated, while expectations of a Federal Reserve rate hike this month remained subdued ahead of key US inflation data due this week.

Spot gold rose 0.4% to $4,186.91 per ounce by 08:58 GMT. US gold futures for December delivery rose 0.5% to $4,211.30 per ounce.

"Attention now turns to a busy week of US economic releases, including September CPI on Wednesday, followed by PPI and retail sales on Thursday and Fed Chair Kevin Warsh’s appearance at the IMF on Friday," said Ole Hansen, head of commodity strategy at Saxo Bank.

"Together, these events could shape the near-term direction of bond yields, the dollar, and consequently, precious metals," adding that bullion is attracting buying interest.

Oil prices fell on Tuesday and were on track for their first decline in nearly a week, while the dollar slipped from 18-month highs. The benchmark 10-year yield slipped to its lowest level since October 2. O/R USD/

Lower yields reduce the opportunity cost of holding non-interest bearing bullion, which is priced in US dollars.

Cleveland Fed President Beth Hammack said the US central bank should move "relatively quickly" to a more restrictive monetary policy stance to control inflation.

Currently, traders see only a 17% chance of a Fed rate hike this month but are pricing in an 87% chance of a December increase, according to CME's FedWatch tool.

"Central bank diversification, together with concerns about rising public debt levels and increasing debt-servicing costs, should continue to underpin the market. We therefore expect gold prices to stabilize and resume their uptrend toward year-end and into 2027," said UBS analyst Giovanni Staunovo.

Among other metals, spot silver edged up 0.2% to $60.4481 per ounce, platinum gained 0.9% to $1,701.10 per ounce and palladium rose 0.5% to $1,149.52 per ounce.