By Sukanya Mitra and Ashitha Shivaprasad
Aug 18 (Reuters) – Gold prices came under pressure on Tuesday from higher Treasury yields and a spike in oil prices, while traders awaited minutes of the U.S. Federal Reserve’s July policy meeting for clues on the outlook for interest rates.
Spot gold was down 0.5% at $4,391.14 per ounce, as of 0423 GMT, while U.S. gold futures for December delivery dropped 0.6% to $4,446.70.
Yields on the benchmark 10-year U.S. Treasury note extended gains, raising the opportunity cost of holding non-yielding bullion. [US/]
Oil prices also edged higher after Iran said it would shift to a “fully offensive” military posture following a breakdown in efforts to negotiate a permanent end to the war with the United States, while Washington ruled out extending a temporary ceasefire agreement. [O/R]
Oil prices will remain one of the key factors keeping gold under pressure as situation in the Middle East continues to look uncertain, ANZ analyst Soni Kumari said.
Traders’ expectations around Fed policy rates are going to be important for gold, with a focus on technical levels, Kumari added.
Elevated energy prices tend to raise inflationary fears and bolster expectations of higher interest rates by the Fed. While gold is typically seen as a hedge against inflation, higher interest rates tend to diminish bullion’s appeal.
However, market pricing for a September quarter-point hike flipped to a nearly 65% chance of a “hold” after unexpected job losses in July, lower-than-expected consumer price inflation and weaker retail sales.
Investors are also awaiting minutes from the Fed’s most recent policy meeting, with the release scheduled for Wednesday.
Spot gold may test a support at $4,381, a break below could open the way toward the $4,320 to $4,351 range, according to Reuters technical analyst Wang Tao.
Among other metals, spot silver slipped 1% to $65.11 per ounce, platinum lost 1.2% to $1,748.56, while palladium fell 1.2% to $1,317.01.
(Reporting by Ashitha Shivaprasad and Sukanya Mitra in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)