Gold slides 1% as Fed hike bets linger ahead of US inflation data

By Sherin Sans

Oct 29 (Reuters) - Gold fell about 1% on Thursday as sticky inflation fueled bets of a potential interest rate hike by the US Federal reserve later this year, while investors awaited a US inflation report for insight into the central bank's next policy moves.

Spot gold slid 1.1% to $4,022.19 per ounce by 0855 GMT. US gold futures for December delivery fell 0.4% to $4,035.00 per ounce. Bullion is on track for its second straight monthly decline.

The Fed kept rates unchanged on Wednesday, as expected, putting off any changes to borrowing costs until after next week's US midterm elections while it awaits more inflation data, keeping a December hike firmly in play.

US Personal Consumption Expenditures data, the Fed's preferred inflation gauge, is due at 1230 GMT.

"Gold may be dragged back into sub-$4,000 levels if the PCE figures exceed market expectations, further paving the way for a December rate hike," said Han Tan, chief market analyst at Bybit.

Traders are still pricing in about an 80% chance of a rate hike in December, according to the CME's FedWatch Tool.

Meanwhile, the European Central Bank is expected to hold rates later on Thursday, though the decision could be overshadowed by turmoil in France's bond market.

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

"Markets are still wary about another potential spike in geopolitical tensions following the US midterm elections. If oil benchmarks revisit $120 and beyond, amplifying inflationary pressures that invite further monetary policy tightening, gold would likely post a fresh year-to-date low," Tan said.

Oil prices fell on Thursday as hopes for peace talks rekindled after US Vice President JD Vance sent a letter to Iranian Security Council chief Mohsen Rezaei to revive negotiations. O/R

Spot silver fell 2.4% to $52.67, platinum dropped 2.3% to $1,502.61 and palladium slid 0.8% to $1,002.55 per ounce.