Gold Prices Fall as Oil-Driven Inflation Concerns Weigh on Markets

Gold prices edged lower on Monday due to concerns over inflation, fueled by a rally in oil prices. The U.S. Federal Reserve's upcoming policy meeting is also expected to raise interest rates, which tends to diminish gold's appeal as an inflation hedge.

Spot gold fell 0.5% to $4,327.80 an ounce, while U.S. gold futures for December delivery dropped nearly 1% to $4,368.60. Traders are pricing in about an 86% chance of a rate hike at the central bank's policy meeting on September 15-16.

The inflation concerns were reinforced by data showing that U.S. consumer prices accelerated in August, with underlying inflation posting its largest increase in four months. Oil prices jumped over 2% after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns.