Gold drops as oil rise fuels inflation concerns ahead of US midterms

Spot gold slipped 1.1% to $3,903.48 per ounce by 1202 GMT on Tuesday, reversing a gain of roughly 2% the day before. U.S. gold futures for December delivery fell 1.4% to $3,913.80 per ounce.

Oil prices moved higher after a decline in the previous session, following comments from an Iranian official that Tehran and Washington remained far from a deal to end the conflict and after the United States struck Iran's Qeshm Island.

"Higher oil prices tend to put inflationary pressures up, and with inflationary pressures up, rate expectations tend to drift higher and that's negative for gold," said Nitesh Shah, commodity strategist at WisdomTree.

The United States midterm elections were underway, prompting analysis of potential policy impacts.

"A Democratic sweep would likely prove more problematic for the AI data centre build-out and the broader tech trade," said Tim Waterer, chief market analyst at KCM Trade. "Any further pressure on the tech complex from increased regulatory scrutiny could spill over into gold as positions continue to be cut to cover losses elsewhere," he added.

The World Gold Council reduced its forecast for growth in gold investment this year to 200 metric tons, down from a previous estimate of 400 tons, citing weaker demand for bars and coins, while it raised its outlook for central-bank purchases.

Other precious metals also fell, with spot silver down 3.3% to $48.96 per ounce, platinum down 1.9% to $1,421.43 per ounce, and palladium down 3.1% to $939.41 per ounce.