Gold slips as rising oil prices, Treasury yields dent appeal

Gold prices eased on Thursday, pressured by rising oil prices and US Treasury yields, while expectations the Federal Reserve could tighten monetary policy further weighed on sentiment. Spot gold fell 0.6% to $4,261.55 per ounce, by 1206 GMT, having hit its lowest since September 17. US gold futures for December delivery eased 0.5% to $4,296.30. "Given that there appears to be little progress being made on bringing a decisive end to the war in Iran, oil prices and US Treasury yields are likely to remain elevated," Hamad Hussain, a climate and commodities economist at Capital Economics, said. "That would limit any scope for gold prices to rise and could even result in further falls." US 10-year Treasury yields hovered at a near two-decade high, increasing the opportunity cost of holding non-yielding bullion. Oil prices extended gains after climbing 4% in the previous session as diplomatic talks between the United States and Iran showed no concrete signs of progress. Fed officials continued to signal the need for further interest rate increases, with Governor Michael Barr being the latest to highlight the need for tighter monetary policy to curb inflationary pressures. The US central bank raised interest rates for the first time in three years last week, and signalled further interest rate hikes this year. Traders are now pricing a 69% chance of a rate hike in October, according to the CME FedWatch Tool. While gold is widely regarded as an inflation hedge, rising interest rates tend to diminish its appeal relative to interest-bearing investments. "In our baseline scenario, we expect precious metals to lack clear direction, although volatility is likely to remain high. Gold could continue to trade for a couple of quarters near an average of $4,200 per ounce," Intesa Sanpaolo economist Daniela Corsini said in a note. Among other metals, spot silver fell 1.6% to $63.43 per ounce, platinum fell 0.2% to $1,746.87, while palladium gained 0.6% to $1,266.91.