Gold eased on Friday and headed for its steepest weekly decline in over four months, as elevated oil prices bolstered expectations that interest rates will stay higher for longer, while investors awaited next week's Federal Reserve policy meeting. Spot gold eased 0.2% to 4,016.27 dollars per ounce by 0351 GMT, paring losses slightly after touching its lowest level since 20 July earlier in the session. The metal had fallen 3.5% so far in the week, which was poised to be its worst since June. US gold futures for December delivery dropped 0.7% to 4,030.40 dollars.

Oil's surge changes the rate picture

Oil prices rose about 4% to a five-month high on Thursday after Houthi attacks on Saudi Arabia stoked concerns of further disruption to energy supplies. Higher energy prices revive inflation fears, lifting bond yields and delaying expectations of Federal Reserve easing, which hurts non-yielding bullion by raising the opportunity cost of holding it. Monte Safieddine, head of market research at Capital.com, said speculators were trying to defend the key 4,000-dollar level for gold, warning that a clean break below would signal that the market had stopped pricing rate relief and started pricing sticky inflation, elevated yields and a stronger dollar.

All eyes on the Fed meeting

Focus has turned to the Fed's 27-28 October policy meeting and next week's Personal Consumption Expenditures data, the central bank's preferred inflation gauge as it targets 2% inflation. Traders largely expect the central bank to leave interest rates unchanged next week, but expectations for a rate rise in December remained at around 80%. This brief reports market movements only and is not investment advice; gold and oil prices can move sharply on geopolitical headlines, and readers should not treat any price level as a prediction.