PRECIOUS-Gold falls as higher oil stokes inflation fears ahead of US midterms

Updates prices

By Sherin Sans

Nov 3 (Reuters) - Gold prices fell on Tuesday, after gaining about 2% in the previous session, as energy-driven inflation worries kept investors on edge ahead of the US midterm elections.

Spot gold XAU= slipped 1.1% to $3,903.48 per ounce by 1202 GMT. US gold futures GCcv1 for December delivery fell 1.4% to $3,913.80 per ounce.

Oil prices rebounded on Tuesday after a steep selloff in the previous session, as an Iranian official said Tehran and Washington remained far from a deal to end the war and the US struck Iran's Qeshm Island. O/R

"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.

Higher interest rates increase the opportunity cost of holding non-yielding gold. Traders currently see a 76% chance that the US Federal Reserve will raise rates in December, according to CME's FedWatch tool.

Crucial midterm elections, meanwhile, were underway in the US. "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."

Meanwhile, the World Gold Council cut its forecast for growth in gold investment this year to 200 metric tons from 400 tons estimated previously, citing weaker appetite for bars and coins. It, however, raised its estimate for central bank purchases.

Among other metals, spot silver XAG= slipped 3.3% to $48.96 per ounce, platinum XPT= fell 1.9% to $1,421.43 and palladium XPD= dropped 3.1% to $939.41.

(Reporting by Sukanya Mitra and Sherin Sans in Bengaluru; Editing by Shri Navaratnam and Joyjeet Das)

((sherin.sans@thomsonreuters.com;))