Gold prices edged lower on Monday as a rally in oil prices fuelled inflation concerns and reinforced expectations that the U.S. Federal Reserve could raise interest rates at its policy meeting this week.

Spot gold was down 0.5% at $4,327.80 an ounce by 0119 GMT after posting a third consecutive weekly ‌decline on Friday. U.S. ⁠gold ⁠futures for December delivery fell nearly 1% to $4,368.60.

Traders are pricing in about an ​86% chance of a U.S. rate hike at the central bank's policy meeting ​on September 15-16, up from about 67% prior to inflation data last week, according to the CME FedWatch Tool.

U.S. consumer prices accelerated ​in August, while a key measure of underlying ⁠inflation posted ‌its largest increase in four months, data on Friday ​showed, reinforcing ​expectations that the Fed will raise interest rates this ⁠week.

Although gold is typically seen as an ​inflation hedge, higher interest rates tend to diminish non-yielding ​bullion's appeal to investors.

Oil prices jumped more than 2% on Monday after fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf compounded supply concerns following the closure of a key Saudi oil pipeline.

Middle East diplomacy appeared to falter ‌after a meeting between Iran and other Gulf states was postponed.

Goldman Sachs saidon Friday it still sees upside ​risk to its ​forecast for gold ⁠to reach $4,900 an ounce by the end of 2026, although it expects price volatility to remain elevated.

Elsewhere, two European Central Bank policymakers ​left the door open to further rate hikes if conflict-driven increases in energy prices feed through to broader inflation in the euro zone.

Among other metals, spot silver slipped 1.1% to $63.75 per ounce on Monday, platinum dropped 0.8% to $1,782.50, and palladium slid 0.7% to $1,290.36.