Gold edged higher on Monday as softer oil prices tempered inflation concerns, while investors awaited the Federal Reserve's policy decision later this week.
Spot gold rose 0.4 percent to US$4,010.51 per ounce by 0544 GMT, after hitting its lowest level since mid-July in the previous session. Bullion posted a 4 percent weekly fall on Friday, its steepest weekly decline since June.
US gold futures GCcv1 for December delivery gained 0.4 percent to US$4,024.00.
"The jump that we've seen is mostly symptomatic of the kind of relief provided by a lower oil price, but one that could easily be capped as markets position for the FOMC decision in a couple of days' time," said Kyle Rodda, senior financial market analyst at Capital.com.
"Gold will continue to trade as a function of interest rate expectations and geopolitical risks."
Oil prices fell on Monday after surging to near six-month highs last week, amid hopes of easing hostilities between the United States and Iran, although ongoing attacks on Saudi Arabiaby Yemen's Houthis kept supply concerns in focus. O/R
Qatari mediators were in Tehran on Sunday to help de-escalate regional tensions in coordination with the United States, an official briefed on the situation told Reuters.
Markets await the Fed's policy meeting on October 27-28.
The US Personal Consumption Expenditures data, a key gauge closely watched by the central bank as it targets a 2 percent inflation rate, is due the next day.
Traders largely expect the central bank to leave rates unchanged this week, while expectations for a hike in December are at 77 percent, according to the CME's FedWatch Tool.
Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish non-yielding bullion's appeal to investors.
Meanwhile, US business activity slowed modestly in October, though robust demand allowed companies to raise prices for goods and services, a sign that inflation could increase further and remain persistently high in the coming months.
Among other metals, spot silver rose 0.6 percent to US$54.19 per ounce, platinum dropped 0.2 percent to US$1,548.30 and palladium gained 0.2 percent to US$1,046.25.
Reuters
