Gold rises modestly as oil prices ease and investors eye Fed decision

Spot gold increased 0.3% to $4,008.70 per ounce by 0755 GMT on Monday, after reaching its lowest level since mid-July the day before. The metal had posted a 4% weekly decline on Friday, the sharpest weekly drop since June. US gold futures for December delivery also rose 0.3% to $4,021.90.

"The jump that we've seen is mostly symptomatic of the kind of relief provided by a lower oil price, but one that could easily be capped as markets position for the FOMC decision in a couple of days' time," said Kyle Rodda, senior financial market analyst at Capital.com.

Rodda added that gold's price movements will continue to reflect interest-rate expectations and geopolitical risks. Oil prices fell on Monday after climbing to near six-month highs last week, amid hopes that tensions between the United States and Iran may ease, although attacks on Saudi Arabia by Yemen's Houthis kept supply concerns alive. Qatari mediators were in Tehran on Sunday to help de-escalate regional tensions in coordination with the United States, an official told Reuters.

Investors are awaiting the Federal Reserve's policy meeting scheduled for October 27-28, with the US Personal Consumption Expenditures data due on Thursday. Traders largely expect rates to remain unchanged, while the CME FedWatch Tool shows a 79% probability of a rate hike in December.

Higher interest rates typically reduce the appeal of non-yielding bullion, even as gold is often viewed as an inflation hedge. US business activity showed a modest slowdown in October, but strong demand allowed firms to raise prices, suggesting inflation could stay elevated.

Among other precious metals, spot silver rose 0.2% to $54.00 per ounce, platinum fell 0.3% to $1,546.18, and palladium slipped 0.5% to $1,038.85.