Gold gains on softer oil prices ahead of Fed meeting

By Vishak Mathew

Oct 27 (Reuters) - Gold prices rose about 1% on Tuesday as lower oil prices lent support, with market participants awaiting the Federal Reserve's policy meeting for signals on the future path of US interest rates.

Spot gold climbed 0.9% to $4,051.78 per ounce by 10:59 a.m. ET (1459 GMT) after hitting as low as $3,987.14 earlier in the session.

US gold futures for December delivery rose 0.69% to $4,066.40 per ounce.

"Softer oil prices will probably provide some lift for gold because it relieves the inflation worries and arguably moderates Fed hawkishness to some degree," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

"I think the market is just merely trading at this point off Middle East headlines and ongoing negotiations," Grant added.

Oil futures fell more than 1% on Tuesday as attention turned to Middle East peace talks, though prices remain near multi-month highs as the Houthi-Saudi Arabia conflict rages and the potential for fresh US-Israeli attacks hangs over the market. O/R

However, "if crude oil prices are going to continue to rise, that's going to cause problematic price inflation, and that's going to cause central banks to tighten their monetary policy. And that's bearish for gold," said Jim Wyckoff, a market analyst at American Gold Exchange.

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

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

Traders are now pricing in an 83% probability of a US rate hike in December, according to the CME's FedWatch Tool.

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

Analysts cut their 2026 gold price forecast for a second straight quarter because of high Treasury yields, a strong US dollar and expectations that rates will stay high for longer, but still expect a recovery in 2027, a Reuters survey shows.PREC/POLL

Among other metals, spot silver rose 0.8% to $54.37 per ounce after hitting its lowest in almost a year, platinum edged up 0.3% to $1,531.95 after falling to its lowest since late November 2025 and palladium dropped 1.4% to $1,035.00 after slipping to its lowest since June 2025, earlier in the session.