Gold prices gained after three days of losses on Tuesday as the dollar retreated from an earlier three-month peak and US equities weakened, even as benchmark US Treasury yields passed 3 percent for the first time in more than four years.
The yield on US 10-year Treasury notes rose above 3 percent as investors reduced their US bond holdings on worries about rising inflation and growing government debt supply.
Rising yields typically make gold less attractive since it does not bear interest.
But a retreat in world stocks after yields crossed 3 percent and weakness in the US dollar drew investors to gold and lifted its value, since it is priced in the greenback, said David Meger, director of metals trading at High Ridge Futures in Chicago.
“The dollar has been a driving force as of late. We’ve been seeing a little weakness in equities today, too,” Meger said.
Spot gold gained 0.5 percent to USD 1,330.84 per ounce by 1:34 p.m. EDT (1734 GMT), while US gold futures for June delivery settled up USD 9, or 0.7 percent, at USD 1,333.
Gold is often seen as a safe store of value in times of elevated geopolitical or financial risk.
It has benefited in recent weeks from concerns over the US-China trade dispute, sanctions on Russia and unrest in the Middle East, but has been kept in check by the prospect of further interest rate hikes from the Federal Reserve.
“Based on interest rates, prices should be lower,” said Capital Economics analyst Simona Gambarini. “But there are a lot of other factors, and a lot of tensions that have been boosting prices… we think gold will continue to trade in this range between USD 1,300-1,350 depending on what happens with those risks, and the Fed hiking rates.”
Autocatalyst metal palladium lost 0.5 percent to USD 973.65 an ounce, earlier hitting near a two-week low of USD 960.47. It plunged 5 percent Monday after the United States gave American customers of Russia’s biggest aluminium producer Rusal more time to comply with sanctions.
Rusal owns a 28 percent stake in Norilsk Nickel , the world’s biggest palladium producer.
“(Palladium) has followed base metals prices on their downward trajectory now that the United States is considering lifting the sanctions against Rusal and probably will not impose further sanctions against Russia,” Commerzbank said in a note.
Platinum increased 1.6 percent to USD 932.10 an ounce, earlier dropping to USD 910.50, a 2-1/2-week low. Silver gained 1.2 percent to USD 16.72 an ounce after falling more than 3 percent in the previous session.