Gold prices declined on Thursday as rising U.S. Treasury yields and renewed inflation concerns reduced demand for the precious metal, offsetting support from heightened geopolitical tensions in the Middle East.
Spot gold fell 0.4% to $3,292.49 an ounce, while U.S. gold futures slipped 0.3% to $3,301.90 an ounce as investors reassessed expectations for U.S. monetary policy following the recent rally in oil prices.
The decline came as Treasury yields moved higher, increasing the opportunity cost of holding non-yielding assets such as gold.
Market participants also expressed concerns that higher crude oil prices could reignite inflationary pressures, potentially reducing the scope for interest rate cuts by the U.S. Federal Reserve.
Although escalating tensions in the Middle East typically boost demand for safe-haven assets, investors remained focused on the inflationary implications of rising energy prices.
Stronger inflation expectations have reinforced speculation that policymakers could maintain higher interest rates for longer, limiting the appeal of bullion.
The recent increase in oil prices has added to uncertainty surrounding the global inflation outlook.
Analysts said sustained gains in energy costs could feed into broader consumer prices, prompting central banks to remain cautious about easing monetary policy.
Investors are also monitoring upcoming U.S. economic data for further clues on the Federal Reserve’s policy direction.
Employment, inflation and consumer spending figures are expected to influence expectations for the timing and pace of future interest rate adjustments.
Meanwhile, the U.S. dollar remained relatively firm against major currencies, adding further pressure on gold by making the metal more expensive for holders of other currencies.
Despite the latest decline, gold continues to trade near historically elevated levels as persistent geopolitical uncertainty, central bank purchases and concerns over the global economic outlook continue to provide long-term support for the precious metal.
Market analysts expect bullion to remain volatile in the near term as investors balance safe-haven demand against rising bond yields, inflation expectations and the outlook for U.S. interest rates.
