Gold prices pared earlier gains and closed lower for a third straight session, with Treasury yields extending their recent rally.
Front-month gold for February delivery closed down 0.4% at $1,335.40 a troy ounce on the Comex division of the New York Mercantile Exchange. The dollar falling to multiyear lows pushed gold to its highest level since August 2016 last week, but concerns about higher interest rates have weighed on gold recently.
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The precious metal struggles to compete with yield-bearing assets like Treasurys as borrowing costs rise. Some investors have been betting on a pickup in growth and inflation, which could make central banks around the world more aggressive with interest-rate increases than previously anticipated and weigh on gold, according to analysts.
Investors were waiting on an update from the Federal Reserve expected Wednesday following the central bank's two-day meeting.
Still, some analysts think gold can perform well even in the face of higher rates because many investors use the precious metal to hedge against an unexpected inflation surge.
"We have started to see inflation indicators pick up not only here in the U.S., but globally as well," said Rob Young, portfolio manager of the ICON Natural Resources Fund, which has a small gold position.
A weaker dollar has supported commodities denominated in dollars recently by making them cheaper for overseas buyers. On Tuesday, the WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, declined 0.1%. Gold fell as the dollar bounced higher off its lowest levels of the session.
President Donald Trump's first State of the Union address will also be in focus for investors, as gold is a haven asset that some favor when they think markets might turn rocky.
Among base metals, front-month copper for February delivery continued a recent pattern of sideways trading and closed down 0.1% at $3.1770 a pound. The industrial metal has fallen 3.3% off its nearly four-year highs from December, with some investors waiting to see if China, the world's largest industrial metals consumer, can continue exceeding economic growth expectations.
Write to Amrith Ramkumar at firstname.lastname@example.org and David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
January 30, 2018 14:59 ET (19:59 GMT)
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