Oct 22 (Reuters) - Gold slipped to its lowest level in more than two months on Thursday, as a rally in oil prices heightened inflation worries ahead of the Federal Reserve's policy decision next week.
Spot gold slid 1.9% to $4,060.37 per ounce by 1134 GMT, its lowest level since August 4. US gold futures for December delivery fell 1.8% to $4,075.70 per ounce.
"Gold prices can fall further... because we are still seeing a lot of uncertainty around the energy market," said Soni Kumari, analyst at ANZ.
Brent prices rose to their highest since May after more Houthi attacks in Saudi Arabia stoked concerns over a broader escalation of conflict and further disruptions to crude oil supplies from the world's key exporting region.
Meanwhile, US consumer and producer inflation data came in hotter than expected last week, largely on higher energy costs. That strengthens the case for tighter policy, even though Fed officials are still expected to hold off when they meet on October 27-28.
While gold is typically considered a hedge against inflation, higher interest rates reduce the appeal of the non-yielding asset.
Goldman Sachs expects one more 25-basis-point hike in December, lifting the peak policy rate range to 4.00%-4.25%.
Traders are pricing in an 86% likelihood of a December increase, according to CME's FedWatch Tool, opens new tab.
US Personal Consumption Expenditures data, set for release on October 29 and closely watched by the central bank, could give more clues on rate outlook.
"Given that the PCE data will show that prices rose at an uncomfortably high pace for the Fed, the FOMC communications may strike a hawkish tone and that could weigh on gold prices," said Hamad Hussain, climate and commodities economist at Capital Economics.
Among other metals, spot silver dropped 3.9% to $55.7225 per ounce, platinum slid 2.9% to $1,581.73, its lowest since July 29, while palladium fell 2.5% to $1,059.75 after hitting its lowest level since June 2025.
Reporting by Vishak Mathew in Bengaluru; Editing by Harikrishnan Nair and Shilpi Majumdar
