London: Gold prices reversed course on Thursday, erasing earlier gains as rising US Treasury yields and a firmer dollar pressured prices and concerns grew that the escalating conflict in West Asia could drive up inflation. Spot gold fell 1.2% at $5,075.54 per ounce as of 11:48 a.m. ET (1648 GMT), after rising as much as $5,194.59 earlier. US gold futures for April delivery were down 1% at $5,085.
“The market is looking at higher oil prices and the potential for inflation, while higher Treasury yields usually aren’t great for gold,” said Bart Melek, global head of commodity strategy at TD Securities. The US-Israeli campaign against Iran entered its sixth day on Thursday, with residents reporting heavier bombardment, while Tehran vowed to retaliate after a US strike on a ship far from the main conflict zone. The escalation has kept energy-supply worries elevated, supporting oil prices, fuelling inflation concerns and dimming prospects for interest rate cuts.
Gold is often viewed as a hedge against long-term inflation, but tends to perform better when interest rates fall. The metal, which hit a record $5,594.82 on January 29, briefly climbed above $5,400 on Monday as the start of the US-Israeli air campaign drove safe-haven demand, but later eased as the dollar attracted its own flight-to-safety flows. The US dollar index rose 0.5%, making greenback-priced bullion more expensive for overseas buyers, while US 10-year Treasury yields climbed to a three-week high, raising the opportunity cost of holding non-yielding gold.
