Gold at more than a two-month low as inflation fears worsen

US gold futures for December delivery fell 1.2% to $1,850.30.

Brent crude prices rose to their highest levels since May after new attacks by the Yemeni Houthi group on Saudi Arabia fueled fears of a wider escalation.

David Meger, director of metals trading at High Ridge Futures, said, "We saw a rise in energy prices overnight. Concerns about inflationary pressures are increasing as a result. With these pressures mounting, there are clear concerns that the Federal Reserve will continue to raise interest rates."

While gold is usually considered a hedge against inflation, rising interest rates reduce the appeal of the non-yielding metal.

US consumer and producer price inflation data last week came in higher than expected, strengthening the case for tighter monetary policy, although Fed officials are still not expected to take this step when they meet on October 27 and 28.

According to the CME FedWatch tool, traders expect an 86% chance that the US central bank will raise rates in December.

Personal consumption expenditure data scheduled for release on October 29 could provide further clues for interest rate expectations. This data represents a key indicator closely watched by the central bank.

Economists at Intesa Sanpaolo said in a note, "We expect precious metals not to take a clear direction, but there is a possibility that volatility will remain at high levels. Gold may continue to trade for several quarters around an average of $1,800 per ounce, driven by a sharp contraction in global demand for jewelry."

As for other precious metals, spot silver fell 3.6% to $23.89 per ounce, platinum fell 2.7% to $984.15, its lowest level since July 29, and palladium fell 1.9% to $2,066.89 after hitting its lowest level since June 2020.