Gold falls to more than two-month low as oil-fuelled inflation fears weigh

By Noel John and Anushree Mukherjee

Oct 22 (Reuters) - Gold fell to its lowest level in more than two months on Thursday as higher oil prices stoked inflation concerns and reinforced expectations that interest rates could stay elevated for longer, while investors looked ahead to next week's Federal Reserve meeting.

Spot gold slid 1.4% to $4,084.25 per ounce by 09:11 a.m. EDT (1311 GMT), after falling to its lowest level since August 4 earlier in the session.

U.S. gold futures for December delivery fell 1.2% to $4,100.30 per ounce.

Brent prices rose to their highest since May after more Houthi attacks in Saudi Arabia stoked concerns over a broader escalation. O/R

"We had seen energy prices increase overnight. And as a result of that, concerns about these inflationary pressures are rising. As those inflationary pressures rise, we see the obvious result of concerns that the Fed is going to continue to raise interest rates," David Meger, director of metals trading at High Ridge Futures, said.

While gold is typically considered a hedge against inflation, higher interest rates reduce the appeal of the non-yielding asset.

Additionally, last week's US consumer and producer inflation data came in hotter than expected, strengthening the case for tighter policy, even though Fed officials are still expected to hold off when they meet on October 27-28.

Traders are pricing in a 86% likelihood of an increase in December, according to CME's FedWatch Tool. FEDWATCH

US Personal Consumption Expenditures (PCE) data due on October 29, could also offer fresh clues on the path of interest rates.

"We expect precious metals to lack clear direction, although volatility is likely to remain high. Gold could continue to trade for a couple of quarters near an average of $4,200 per ounce, driven by a sharp contraction in global jewellery demand," economists at Intesa Sanpaolo said in a note.

Meanwhile, India has issued permits to import around 6,500 metric tons of silver over the next six months as the world's biggest consumer of the precious metal seeks to meet festive-season demand.

Among other metals, spot silver dropped 3.6% to $55.89 per ounce, platinum slid 2.7% to $1,584.15, its lowest since July 29, while palladium fell 1.9% to $1,066.89 after hitting its lowest level since June 2025.