Gold stalls as high Oil prices lift US Treasury yields

Gold declined on Monday as bond yields remained high, despite a drop in oil prices, according to traders assessing the outlook for the US Federal Reserve's interest rate policy. The precious metal fell by up to 0.7 percent to $4,136.71 an ounce during US trading hours. Treasury yields and inflation-adjusted rates continued to rise, even though oil had slipped from a five-month high following a surge in Middle Eastern conflicts.

The stronger yields were also attributed to a decline in French bonds following violent unrest over the weekend. Higher interest rates typically pose challenges for gold, which yields no income. Additionally, lower liquidity in the market on Monday, according to Nicky Shiels, head of metals strategy at MKS PAMP, contributed to the decline.

The weakness of gold may continue in the near term as investors continue to evaluate the direction of the Fed's policy path. TD Securities commodity strategists noted that hedge funds and money managers had reduced their bullish bets on Comex gold, with short positions increasing faster than long positions. Gold's price slipped by 0.6 percent to $4,140.66 an ounce by 4:06 pm in New York, while silver rose slightly and platinum and palladium also advanced. The Bloomberg Dollar Spot Index remained unchanged.