Oil-Driven Inflation Concerns Weigh on Gold Prices

Gold prices fell on Monday as rising oil prices fueled inflation concerns and boosted expectations that the US Federal Reserve will raise interest rates at its upcoming policy meeting. Spot gold dropped 0.5% to $4,327.80 an ounce by 0119 GMT after posting a third consecutive weekly decline on Friday.

Traders are pricing in about an 86% chance of a US rate hike at the Fed's policy meeting on September 15-16, up from around 67% prior to inflation data last week. Higher interest rates tend to diminish gold's appeal to investors, as it is typically seen as an inflation hedge.

The rally in oil prices was driven by fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf, which compounded supply concerns following the closure of a key Saudi oil pipeline.