Gold slips as oil rally fans rate hike bets ahead of Fed meeting

Among other metals, spot silver XAG= slid 1% to $63.80 per ounce, platinum XPT= dipped 0.2% to $1,792.59, and palladium XPD= fell 0.4% to $1,293.86.

Oil prices jumped more than 2% on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns following the closure of a key Saudi oil pipeline. O/R

Middle East diplomacy appeared to falter after a meeting between Iran and other Gulf states was postponed.

Reinforcing expectations that the Fed will raise interest rates, data last week showed U.S. consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months.

Traders are pricing in about an 87% chance of a rate hike at the central bank's policy meeting on Tuesday and Wednesday, up from about 67% prior to the inflation data last week, according to the CME FedWatch Tool.

The BOJ is also expected to raise rates on Friday, as persistent inflation and resilient economic growth have raised the prospect of further rate hikes by major central banks, amid rising energy prices and little sign of easing Middle East tensions.

Although gold is typically seen as an inflation hedge, higher interest rates tend to reduce the appeal of non-yielding bullion.

Gold prices eased on Monday as a surge in oil prices stoked inflation concerns, boosting expectations that the U.S. Federal Reserve may raise interest rates at its policy meeting this week.