Gold drops after sharp gains as inflation concerns come to the fore

Gold prices fell on Thursday as traders took profits from the previous session's gains and focused on the risk of higher inflation, underlined by a rise in oil prices.

Spot gold XAU= slipped 0.8% to $4,484.95 per ounce by 09:53 a.m. EDT (1353 GMT), retreating from its highest since June 2, a level hit earlier in the session. U.S. gold futures GCcv1 edged 0.1% lower to $4,539.50.

Gold had leapt by over 4% on Wednesday, while the U.S. dollar and bond yields dropped sharply after the Treasury's announcement it would increase buybacks of longer-dated bonds.

"With our U.S. economists expecting the Fed to remain on hold, we see scope for gold to exceed $5,000/oz in 2027, potentially earlier," but with scope for volatility too, Morgan Stanley analysts said in a note.

"A lower implied probability of Fed hikes has brought ETF inflows, while stronger central bank buying and a steepening yield curve are also providing support."

Among other metals, spot silver XAG= rose 0.5% to $67.28 per ounce, platinum XPT= dropped 1.4% to $1,799.70, and palladium XPD= slid nearly 1% to $1,321.50.