Gold prices edged lower on Wednesday 28 October as higher oil prices fuelled worries about inflation, while investors waited for the US Federal Reserve's policy decision later that day. Spot gold was 0.2% lower at $4,050.55 per ounce by 1249 GMT, Reuters reported, and US gold futures for December delivery fell 0.2% to $4,064.60 per ounce.

Early trading already pointed lower

Earlier in the day, COMEX gold had traded at $4,068.70 per ounce, down $5.90 or 0.14%, at 7:24 am IST, while silver stood at $54.410 per ounce, down 0.19%. The pressure on bullion came largely from the oil market. Crude prices rose more than 1% after an attack on a refinery in Saudi Arabia renewed concerns about Middle East supply risks, raising the prospect that energy costs could keep inflation higher for longer. That matters for gold because expectations of rates staying elevated raise the opportunity cost of holding an asset that pays no interest, while a stronger dollar made dollar-priced bullion dearer for other buyers.

Rate outlook leaves gold caught between two forces

"The rise in oil prices and the risk that it results in the Fed taking a more hawkish stance than market participants expect appears to be weighing on gold prices," Hamad Hussain, climate and commodities economist at Capital Economics, told Reuters. The Fed was widely expected to leave its benchmark rate unchanged at 1800 GMT, with traders pricing in an 83% probability of a December hike, according to CME's FedWatch Tool. Investors also awaited US Personal Consumption Expenditures data due on Thursday, a gauge the Fed watches as it targets 2% inflation. The tension for gold is clear: higher oil could push the Fed tougher and weigh on prices, but escalating tensions could also support safe-haven demand.

Sources: Reuters via Kitco News, CNBC-TV18 via TradingView, IndexBox.