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LONDON. — Gold hit a two-week low yesterday, as investors piled into the dollar with US Treasury yields approaching 3 percent and geopolitical tensions eased. The yield on 10-year US Treasuries hit its highest since January 2014, lifting the dollar index to a seven-week peak and making dollar-priced gold costlier holders of other currencies.

“If we break above (3 percent) it will be first time in 5 years this has happened and this increases opportunity cost of holding (non-yielding) gold,” said Mitsubishi analyst Jonathan Butler.

But he said the reason yields were rallying was because interest rates were expected to climb due to rising inflation.
“If inflation is rising, gold provides a hedge,” he said.

Butler said he saw longer term upside risk for gold from rising inflation, returning geopolitical tensions and a US currency stuck in a long-term downtrend as central banks around the world begin raising rates.

Spot gold was down 0,5 percent at $1,327.93 per ounce at 1005 GMT, after earlier touching its lowest since April 9 at $1,326.91.
US gold futures fell 0,6 percent to $1,329.80 per ounce. Gold, seen as a safe haven in times of political turmoil, was also under pressure after North Korea said at the weekend it would suspend nuclear and missile tests before planned summits with South Korea and the United States.

Added to this were signs that US China relations might be thawing. But easing world stocks limited gold’s losses, as investors awaited earnings from global tech firms and US bond yields approached peaks that hurt risk appetite in the past. — Reuters.