Gold retreats as Middle East tensions ebb

Tehran downplayed Israel’s retaliatory drone strike against Iran, in what appeared to be a move aimed at averting regional escalation.

Gold slipped on Monday after rising as high as $2,417.59 in the previous session, a level not far away from a record high of $2,431.29 hit on April 12.

“Right now, there is a lack of catalyst for gold prices to actually push up higher. At this juncture, it seems to us that the market is now coming to the realization on the higher cost of holding gold,” said Kelvin Wong, a senior market analyst for Asia Pacific at OANDA.

Asian stocks recovered some losses and bond yields rose as fears of a wider Middle East conflict ebbed, with investors gravitating back towards riskier assets.

Benchmark 10-year U.S. Treasury yields edged up and were last at 4.6599%, making non-yielding bullion less attractive.

Nevertheless, Wong said the geopolitical risk premium remained positive in the medium to long term as the conflict between Israel and Hamas lacked clarity or signs of ceasefire.

Meanwhile, progress on bringing down inflation has “stalled” this year, Chicago Federal Reserve President Austan Goolsbee said, echoing other Fed officials who believe that rates will need to stay high for longer to get price pressures under control again.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

The personal consumption expenditures price index, the Fed’s preferred inflation gauge, is due on Friday.

Among other precious metals, spot silver fell 2.3% to $27.99 per ounce, spot platinum rose 0.3% to $934.03, and palladium fell 0.3% to $1,023.17.