Gold slips as Mideast attacks fan inflation concerns; US midterms in focus

By Sukanya Mitra

Nov 3 (Reuters) - Gold prices eased on Tuesday as renewed gains in oil prices fanned inflation concerns and reinforced expectations of higher interest rates, while investors awaited the outcome of US midterm elections for clues on the broader market outlook.

Spot gold fell 0.9% to $3,913.62 per ounce by 0653 GMT after surging more than 2% on Monday to rebound from a one-year low hit on Friday. US gold futures for December delivery dropped 1.2% to $3,923.00.

"Gold's recovery efforts have been somewhat curtailed by oil’s rebound as risk premium returns to the market. For gold to properly turn the corner, it will likely need a convincing push back above $4,000," said Tim Waterer, chief market analyst at KCM Trade.

Oil prices edged higher on Tuesday after a report that the United States had struck Iran's Qeshm Island, raising fears of an escalation in the eight-month conflict and prolonged disruptions to Middle East oil supplies. O/R

Elevated energy prices raise expectations that the Federal Reserve will keep interest rates higher for longer, increasing the opportunity cost of holding non-yielding bullion.

Traders currently see a 73% chance that the central bank will raise rates in December, according to CME's FedWatch tool.

Market participants now await the US midterm elections later in the day for signals on future policy and market sentiment.

"A Democratic sweep would likely prove more problematic for the AI data-centre build-out and the broader tech trade. Any further pressure on the tech complex from increased regulatory scrutiny could spill over into gold as positions continue to be cut to cover losses elsewhere," Waterer said.

Meanwhile, the World Gold Council said robust inflows into gold-backed exchange-traded funds, resilient physical investment demand and continued central bank purchases should support investment demand for the metal.

Among other metals, spot silver slipped 3% to $49.11 per ounce, platinum fell 1.3% to $1,430.60 and palladium dropped 2.3% to $946.50.