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

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 U.S. Treasury yields.

Spot gold XAU= eased 0.5% to $4,392.86 per ounce by 1201 GMT, while U.S. gold futures GCcv1 for December delivery fell 0.5% to $4,449.50 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 selloff in U.S. government bonds picked up pace, sending the 30-year Treasury yield to a near two-decade high.

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 66% chance of a "hold" after unexpected U.S. 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.