Gold eases on higher oil prices ahead of Fed decision

By Sherin Sans

Oct 28 (Reuters) - Gold prices edged lower on Wednesday, as inflation worries simmered over high oil prices and investors awaited the Federal Reserve's policy decision later in the day.

Spot gold eased 0.1% to $4,055.59 per ounce by 0854 GMT, after gaining about 1% in the previous session.

US gold futures for December delivery dropped 0.1% to $4,070.20 per ounce.

Oil prices rose by more than $2 after an attack on a refinery in Saudi Arabia renewed concerns about supply risks. O/R

"The rise in oil prices and the risk that it results in the Fed taking a more hawkish stance than market participants expect appears to be weighing on gold prices," said Hamad Hussain, climate and commodities economist at Capital Economics.

Elevated energy prices bolster expectations of higher-for-longer interest rates, increasing the opportunity cost of holding non-yielding gold.

The Fed is widely expected to leave its benchmark interest rate unchanged when it announces its decision at 1800 GMT. Traders are pricing in an 84% probability of a hike in December, according to CME's FedWatch Tool.

Investors also await US Personal Consumption Expenditures data, due on Thursday, a gauge the Fed watches closely as it targets 2% inflation.

"Should PCE come in soft and the Fed fall short of hawkish expectations, bullion could push higher," Nikos Tzabouras, an independent financial markets analyst, said.

Analysts cut their 2026 gold price forecast for a second straight quarter due to high Treasury yields, a strong US dollar and expectations that rates will stay higher for longer, but still expect a recovery in 2027, a Reuters survey showed.

Additionally, analysts and traders cut their platinum and palladium price forecasts for 2026 for a third straight quarter, a Reuters survey showed.

Among other metals, spot silver slid 0.6% to $54.04, platinum lost 0.1% to $1,538.50, and palladium ticked up 0.2% to $1,027.80 per ounce.