April 28 (Reuters) – Gold slipped to a more than three-week low on Tuesday, following a rise in oil prices after stalled U.S.–Iran talks, as markets weighed inflation risks and interest-rate concerns ahead of a slew of central bank decisions.
Spot gold dropped 1.6% to $4,605.18 per ounce, as of 1105 GMT, its lowest level since April 6. U.S. gold futures for June delivery fell 1.6% to $4,619.10.
“Today’s decline in gold (and silver) prices mirrors an increase in oil prices due to the lack of progress in the negotiations between the U.S. and Iran,” said Julius Baer analyst Carsten Menke.
U.S. President Donald Trump is unhappy with the latest Iranian proposal on resolving the two-month war, a U.S. official said, dampening hopes for a resolution to the conflict that has disrupted energy supplies, fuelled inflation and killed thousands.
Brent oil prices climbed above $110 a barrel, as the crucial Strait of Hormuz waterway remained largely shut.
“The gold market seems more concerned by the risk of tighter monetary policy due to the impact of the war than the risk of slowing global growth,” Menke added.
Elevated crude prices add to inflationary pressures, increasing the likelihood of higher interest rates. While gold is traditionally seen as a hedge against inflation, high interest rates weigh on its appeal as a non-yielding asset.
The Bank of Japan kept interest rates steady but three of its nine-member board proposed hiking borrowing costs, signalling policymakers’ concerns over inflationary pressures from the Middle East conflict.
The U.S. Federal Reserve is also widely expected to hold interest rates steady at the end of its two-day meeting on Wednesday.
Investors are also looking out for other central bank decisions this week, including those from the European Central Bank, the Bank of England and the Bank of Canada.
The dollar gained, while the benchmark 10-year U.S. Treasury yields rose to a three-week high, further pressuring greenback-priced metals.
Spot silver fell 3.3% to $72.98 per ounce, platinum lost 2.7% to $1,928.21 and palladium was down 2.3% at $1,442.41.
Reporting by Pablo Sinha in Bengaluru; Editing by Vijay Kishore and Shailesh Kuber
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