Gold moved lower early Tuesday, dropping for a second day as the dollar and yields rose after the United States reported inflation continued to surge last month on higher energy prices that followed the war on Iran. Gold for June delivery was last seen down $28.80 to US$4,700.50 per ounce.
The U.S. Bureau of Labor Statistics reported the April Consumer Price Index (CPI) rose at a 3.8% annualized pace, up from 3.3% in March, but matching expectations according to Marketwatch.
Core CPI, excluding food and energy costs, rose 2.8%, up from 2.6% a month earlier, and above consensus estimates for a 2.7% rise.
The rise comes as the Strait of Hormuz has been blocked since Feb. 28, when the United States and Israel launched the war on Iran, keeping 20% of daily oil demand supplied by Persian Gulf nations from the market, creating the largest-ever energy supply shock and raising oil prices by nearly half.
Rising energy costs have raised concerns central banks will raise interest rates to slow inflation, sending investors to bonds and the dollar and keeping gold rangebound.
"Gold's rally has paused as higher real rates cap upside, but ongoing geopolitical risks and solid central-bank demand should provide downside support," TD Economics wrote.
The dollar rose following the CPI report, with the ICE dollar index last seen up 0.29 points to 98.25. Treasury yields also rose, with the yield on the U.S. two-year note up 2.5 basis points to 3.994%, while the 10-year note was paying 4.446%, up 3.3 points.