Gold eases from over two-month high as rising oil prices cloud rate outlook
GLD•Gold pulls back after earlier two-month high
Gold prices fell on Tuesday after hitting a more than two-month high earlier in the session, as fading hopes for a U.S.-Iran peace deal lifted oil prices and fuelled concerns that inflation and interest rates could remain elevated.
Spot gold XAU= was down 0.4% to $4,371.92 per ounce by 0855 GMT, after hitting its highest level since June 5 earlier at $4,434.84.
U.S. gold futures GCcv1 rose 0.3% to $4,430.80.
Yields on the benchmark 10-year U.S. Treasury note US10YT=RR rose to an over one-week high, increasing the opportunity cost of holding bullion.
Oil, yields and inflation data keep attention on Fed path
"The rise in oil prices has provided a boost to U.S. Treasury yields, which is weighing on gold prices," said Hamad Hussain, a climate and commodities economist at Capital Economics.
Oil prices rose after U.S. President Donald Trump responded to Iran's conditions for a peace deal by demanding that Tehran pay compensation for people killed in wars, attacks and protests. The comments added to uncertainty over efforts to reopen the Strait of Hormuz. O/R
Higher oil prices could add to inflation pressures and keep interest rates elevated, making non-yielding gold less attractive.
Traders are currently pricing a 52% chance of an interest-rate hike in September, up from 44% on Monday, according to the CME FedWatch Tool. FEDWATCH
Cleveland Federal Reserve Bank President Beth Hammack said on Monday she believed the time was right to begin raising interest rates gradually so as to avoid the need for sharper increases later.
Investors are now awaiting U.S. consumer price data due on Wednesday and producer price data on Thursday for further clues on the Fed's policy outlook.
