Gold slips as oil, bond yields climb on waning US-Iran peace hopes

NEW YORK: Gold prices slipped on Tuesday after two straight sessions of gains as oil prices jumped on concerns over a prolonged Middle East crisis, fanning inflation expectations and driving a rally in US Treasury yields.

Spot gold eased 0.5percent to USD4,392.86 per ounce by 1201 GMT, while US gold futures for December delivery fell 0.5percent to USD4,449.50 per ounce. “Gold is correcting on a combination of traditional headwinds coupled with some profit-taking after strong gains,” said independent analyst Ross Norman.

A protracted Middle East crisis would feed into higher inflation possibilities and by extension, a firmer dollar and Treasury yields, Norman said. Oil prices extended gains to their highest in more than two weeks, while a sell-off in US government bonds picked up pace, sending the 30-year Treasury yield to a near two-decade high. CHANGE IN RATE EXPECTATIONS Iran said it would shift to a “fully offensive” military posture after talks on a permanent end to the war with the United States broke down, while Washington ruled out extending a temporary ceasefire. Higher energy prices can stoke inflation expectations and reduce prospects for lower interest rates. That tends to weigh on gold, which does not pay interest.

Gold prices hit their highest since June 5 last week after market pricing for a September Fed rate hike flipped to a nearly 66percent chance of a “hold” after unexpected US job losses in July, lower-than-expected consumer price inflation and weaker retail sales. Investors are awaiting minutes from the Fed’s latest policy meeting, due on Wednesday, for further clues on the interest-rate outlook. “While it is too early to suggest we are seeing a resumption of the bull market just yet, there are certainly encouraging signs for bulls,” Norman said, adding that he expects the structural bull run which commenced in 2022 to resume once oil supplies improve. Among other metals, spot silver slipped 1.1percent to USD65.08 per ounce, platinum lost 1.4percent to USD1,745.58 per ounce and palladium dipped 1percent to USD1,318.29.