Gold slips as oil rebound fuels Fed rate-hike expectations

Gold prices moved lower on Monday, pressured by a rebound in oil that revived inflation concerns and reinforced expectations of further interest-rate increases from the US Federal Reserve.

Spot gold was down 0.7% at $4,254.77 per ounce as of 0010 GMT, while US gold futures also drifted 0.7% lower to $4,289.70.

The metal's slide came as oil prices climbed more than 1% after Iran maintained that only diplomacy could resolve its conflict with the United States and Israel. The remarks followed US President Donald Trump's statement that he had turned down an Iranian proposal to reopen the Strait of Hormuz and halt fighting.

Higher energy costs can feed inflation by pushing up expenses across the economy. Gold is often sought as a hedge against rising prices, but it tends to struggle when interest rates are high, since higher yields raise the opportunity cost of holding the non-yielding metal.

The Fed lifted its target rate range by a quarter percentage point earlier this month to between 3.75% and 4%. Traders are pricing in a 66% probability of another US rate hike in October, according to CME's FedWatch Tool.

Cleveland Fed President Beth Hammack said on Friday that she worries persistently elevated inflation could condition Americans to treat high prices as normal, and that the central bank cannot allow that to happen.

Separately, a survey showed US consumer sentiment dropped to a four-month low in September, weighed down by concerns that rising inflation would erode household purchasing power.

Among other precious metals, spot silver fell 1% to $63.67, platinum was down 0.7% at $1,765.28 and palladium lost 0.7% to $1,257.70.

No major data or events were scheduled for Monday, September 28.