Gold Falls as Oil Surges After Saudi Attack Fuels Inflation Fears

Gold prices slid on Tuesday as oil prices surged to multi-week highs following an attack on Saudi energy facilities by Yemen's Houthis, backed by Iran. The attack fueled inflation concerns and boosted expectations for a Federal Reserve rate hike in September.

According to the CME FedWatch Tool, traders are pricing in about a 60% chance of a rate hike at the central bank's policy meeting, up from around 50% before the data. Daniel Pavilonis, senior market strategist at Stone X, said gold is 'range-bound because it is capped by a higher probability of raising interest rates.'

Investors remained cautious ahead of U.S. producer price index data on Thursday and consumer price index data on Friday, as oil prices reignited inflation fears and kept rate-hike bets elevated. Nikos Tzabouras, a senior market analyst at Jefferies-owned Tradu.com, said, 'Higher oil prices stoke inflation risks and expectations for Fed rate hikes, putting the precious metal under pressure.'

Silver edged 0.3% higher to $66.34 per ounce, while platinum rose 1.1% to $1,843.99. Palladium slid 2.5% to $1,354.15.