Gold Slips as Oil Supply Disruptions and 10-Year Yield Hit Highest Since 2007

The main pressure came from the renewed rise in oil prices. Crude prices increased by more than $3 after oil loadings at Saudi Arabia's Red Sea port of Yanbu were suspended and Libya halted operations at three oil fields. The disruptions raised concerns that tighter oil supply could persist, keeping energy prices elevated.

The oil-driven inflation concerns reinforced expectations for a Federal Reserve rate hike. Markets were heavily pricing a 25-basis-point increase, which would bring the federal funds target range to 3.75%–4.00%. The Fed's decision was scheduled for Wednesday, making its guidance on future policy particularly important for gold.

The dollar also strengthened, adding another headwind. Because gold is priced in dollars, a stronger U.S. currency makes bullion more expensive for investors using other currencies, potentially reducing international demand.

Despite the pressure, gold's decline was relatively limited. Much of the expected Fed tightening had already been incorporated into market prices, meaning the central question was shifting from whether the Fed would raise rates to what policymakers would signal about subsequent increases. Analysts cited by Reuters noted that gold could remain vulnerable if the Fed indicated that rates would stay higher for longer.

The pressure was amplified by U.S. Treasury yields. The benchmark 10-year Treasury yield reached its highest level since 2007, increasing the relative attractiveness of interest-bearing assets compared with gold, which does not generate regular income.