Gold slips as rising U.S. yields dim appeal

Gold bars sit in a vault at the Perth Mint Refinery in Perth, Australia, on August 9, 2018.
Carla Gottgens | Bloomberg | Getty Images

Gold prices fell on Tuesday, weighed by rising U.S. Treasury yields, but the decline was capped by a weaker dollar, with investors awaiting U.S. consumer price data to gauge inflation.

Spot gold fell as much as 1% to a session low of $1,816.90 per ounce before paring losses and was down 0.2% at $1,831.16 by 10:27 a.m. EDT.

U.S. gold futures were 0.3% lower at $1,831.20 per ounce.

"If yields continue to rise, this may drag the precious metal lower despite the risk-off mood," said Lukman Otunuga, senior research analyst at FXTM.

The yield on 10-year Treasury notes rose to as much as 1.631%, increasing the opportunity cost of holding non-interest bearing bullion.

"The U.S. dollar index is weaker today ... That's positive for the metal's market, so I wouldn't be surprised to see this pullback as a buying opportunity for the shorter term futures traders," said Kitco Metals senior analyst Jim Wyckoff.

The dollar index hit a more than two-month low in the session, helping gold pare some of its earlier loses.

Investors were also awaiting the U.S. consumer price index for April, due on Wednesday, to gauge if the Federal Reserve will begin to alter its stance on inflation.

At a time of heavy government stimulus, gold is considered a hedge against potential inflation.

Fed officials would like to see higher inflation, more wage growth and several months of strong employment gains before they consider adjusting monetary policy, Chicago Fed Bank President Charles Evans said on Monday.

"Bulls remain in control as long as $1,800 proves to be reliable support ... A solid weekly close above $1,840 could signal a move higher towards $1,855 and $1,870, respectively," FXTM's Otunuga said.

Elsewhere, palladium fell 0.7% to $2,940.98 per ounce, while platinum was down 1.5% at $1,228.42. Silver edged 0.2% higher to $27.37 per ounce.