Gold Holds Decline as Energy-Led Inflation Weighs on Rate Path

(Bloomberg) — Gold held a decline, as elevated oil prices fueled inflation concerns and clouded the Federal Reserve’s path for interest-rate hikes.

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Bullion was trading at around $4,135 an ounce, after falling 0.6% in the previous session. Oil hovered near a five-month high after Iran said it has “no choice” but to assert control over the Strait of Hormuz, while US lawmakers resisted President Donald Trump’s diesel export deal with Russia.

Traders are trying to anticipate the Fed’s next move in its battle to keep inflation in check. Chair Kevin Warsh used the eve of a communications blackout ahead of the central bank’s meeting next week to signal support for keeping rates on hold. That spurred bets on the probability of a quarter-point hike to fall below 20%, from as likely as two-in-three late last month.

Bullion has generally held above $4,100 so far in October, consolidating after a decline of more than 6% in the previous month despite a stronger US dollar and high bond yields. Still, it’s down about a fifth since the US-Iran conflict erupted in late February and traders still see a 90% probability of another rate increase by the end of the year. Higher borrowing costs are a headwind for gold, which doesn’t pay interest.

Spot gold slipped 0.1% to $4,134.91 an ounce at 7:47 a.m. in Singapore, while silver fell 0.3% to $56.93 an ounce. Platinum and palladium also edged lower. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed after gaining 0.1% in the previous session.

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