Gold subdued as oil rises, investors await key US inflation

Among other metals, silver XAG= fell 0.5% to $65.76 per ounce, platinum XPT= dipped 0.2% to $1,821.36, and palladium XPD= slid 0.4% to $1,383.08.

Gold prices inched lower on Tuesday, as oil gained and investors hunkered down for key inflation data this week for clues on the Federal Reserve's interest rate outlook.

Spot gold XAU= fell 0.3% to $4,390.50 per ounce by 0816 GMT, after trading as high as $4,442.70 earlier in the session, while U.S. gold futures GCcv1 for December delivery dropped 0.9% to $4,435.00.

“Gold trades cautiously today, caught between Fed rate hike bets and dollar softness. Higher oil prices stoke inflation risks and expectations for Fed rate hikes, putting the precious metal under pressure," said Nikos Tzabouras, a senior market analyst at Jefferies-owned Tradu.com.

On the geopolitical front, Yemen's Tehran-backed Houthis attacked energy facilities and cities in U.S. ally Saudi Arabia on Tuesday. Oil prices extended gains to multi-weeks highs. O/R

Spot gold fell as much as 2.4% on Friday after data showed U.S. job growth accelerated sharply in August, while the unemployment rate held steady at 4.1%, suggesting an improvement in the labor market.

Traders are now pricing in about a 60% chance of an interest rate hike at the central bank's policy meeting, according to the CME FedWatch Tool, up from about 50% before the data.

Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish non-yielding bullion's appeal to investors.