Gold rises as lower oil prices ease inflation fears ahead of Fed meeting

By Noel John

Oct 26 (Reuters) - Gold prices rose on Monday, rebounding from the previous session's over three-month low, as retreating oil prices tempered inflation concerns ahead of this week's US Federal Reserve meeting.

Spot gold rose 0.3% to $4,007.57 per ounce by 9:23 a.m. EDT (1323 GMT) after hitting $3,975 on Friday, its lowest level since July 20.

US gold futures for December delivery rose 0.4% to $4,021.80 per ounce.

"There's been a bit of a pullback in crude oil, which is helping gold, while some bargain-hunting is also coming in," said Bob Haberkorn, senior market strategist at StoneX. "I think it's going to be light trading here and we're going to hang around the $4,000 level into the Fed announcement to see what they have to say."

Oil prices fell after surging last week but still held near six-month highs, amid hopes of easing hostilities between the US and Iran. O/R

The pullback in oil has offered some relief to inflation concerns, though markets remain wary of renewed supply disruptions that could reignite price pressures.

The Fed's rate decision is due on Wednesday, with a pause widely expected after its September hike, while expectations for a December rate-hike are at 82%, according to the CME's FedWatch Tool. FEDWATCH

Higher rates increase the opportunity cost of holding non-yielding gold.

Fed policymakers have telegraphed they will not raise US short-term borrowing costs again this week, but with inflation concerns still front and centre, investors believe a rate-hike pause will not last for long.

Investors also await US Personal Consumption Expenditures data due on Thursday, the Fed's preferred inflation gauge, for fresh clues on the interest-rate outlook.

Attention is also turning to the November 3 US midterm elections, with investors assessing how the outcome could affect fiscal policy and broader market sentiment.

"We would focus less on the (election) result itself and more on what it implies for fiscal policy, tariffs, geopolitical spending and policy uncertainty. These may have implications for US Treasury yields, dollar and gold," analysts at OCBC said in a note.

Among other metals, spot silver was down 0.4% at $53.67 per ounce, platinum slid 1% to $1,534.80, while palladium rose 0.4% to $1,048.37.