Gold prices fall as yields climb

Gold prices fell on Tuesday as U.S. bond yields firmed, with gold futures posting its worst month since September

Spot gold fell 1.1% to $1,835.29 per ounce. U.S. gold futures declined 1% to $1,833. Higher U.S. 10-year Treasury yields lower the appeal of zero-yield gold

Gold futures closed down 3.31% in May, or the worst month since September when gold lost 3.36%. Still, gold futures is up 1.08% this year

“Gold’s performance in May has been disappointing overall, showing immediate weakness at the first sign of dollar strength while being unable to trace out material gains on USD weakness or lower U.S. bond yields,” OANDA senior analyst Jeffrey Halley said

“That is a warning of more weakness ahead if both reverse,” Halley said, adding that unless there is a sharp escalation in tensions in Eastern Europe, it appears that gold’s downward correction could continue in June

Gold slid from just below $1,900 an ounce at the start of the month to 1,786.60 per ounce on May 16 as the dollar surged to two-decade highs. Bullion has since recovered somewhat

It performed much better than expected at the start of a Federal Reserve rate-hike cycle, as the market continued to price in recession risks, said Stephen Innes, managing partner at SPI Asset Management

Higher short-term U.S. interest rates raise the opportunity cost of holding bullion, but gold is also seen as a safe-haven during economic crises, like a recession