Gold set for second weekly loss as oil-fuelled inflation concerns bolster Fed hike outlook

By Noel John and Anushree Mukherjee

Oct 23 (Reuters) - Gold recovered from a more than three-month low on Friday, but was headed for a second straight weekly decline as elevated energy prices fuelled inflation concerns and reinforced higher-for-longer rate expectations ahead of next week's US Federal Reserve meeting.

Spot gold edged 0.2% higher to $4,030.67 an ounce by 9:18 a.m. EDT (1318 GMT), after earlier slipping below the $4,000 mark for the first time since mid-July to a session low of $3,986.50. Bullion has lost 3.2% so far this week.

US gold futures for December delivery fell 0.3% to $4,046.40 per ounce.

Brent crude touched a more than five-month high, after Houthi attacks in Saudi Arabia stoked concern over further disruption to energy supplies. O/R

"Heightened inflation concerns suggest that major central banks of the world won't be able to ease monetary policies as quickly as they want to. All that's working against the gold and silver market bulls at present," said Jim Wyckoff, a market analyst at American Gold Exchange.

Additionally, "the selloff in the stock market technology sector has prompted margin calls for those stock traders and investors, which is in turn prompting them to sell gold and silver assets," Wyckoff added.

Wall Street's main indexes opened lower as caution prevailed after a sharp selloff in AI-linked stocks. MKTS/GLOB

Meanwhile, traders largely expect the Fed to leave interest rates unchanged at its October 27-28 meeting, although stronger-than-expected US consumer and producer inflation data released last week bolstered the case for tighter monetary policy later this year.

They see a 92% chance of the Fed leaving rates unchanged next week and an 83% probability of a December hike, according to CME's FedWatch Tool. FEDWATCH

The US Personal Consumption Expenditures report, the Fed's preferred inflation gauge, on October 29 could offer further insight.

Elsewhere, gold buying picked up in India this week as lower prices during the major Dussehra festival boosted purchases and lifted premiums, while physical demand in top consumer China was steady even as cautious consumers continued to curb jewellery spending. GOL/

Among other metals, spot silver slid 1.3% to $53.81 per ounce, and palladium dropped 0.4% to $1,050.50, hitting their lowest since November 2025 and June 2025 respectively. Spot platinum fell 0.9% to $1,557.03 per ounce, its lowest since July.

All three metals were headed for weekly declines.