* Crude oil prices edge down from 3% high earlier
* Dollar pares gains, yields reverse course to trade 0.2% down
* Traders now see 58% chance of at least one rate hike by 2026-end (Updates for market close)
May 21 (Reuters) – Gold prices steadied on Thursday after hitting a 1% low earlier, as oil prices fell on uncertainty over a resolution to the U.S.-Israeli war on Iran, with a softer dollar and lower yields supporting bullion.
Spot gold was up 0.1% at $4,547.54 per ounce as of 02:04 a.m. ET (1804 GMT), after falling as much as 1% earlier in the session.
U.S. gold futures for June delivery settled 0.1% lower at $4,542.50.
Oil prices whipsawed in a volatile trading session, trading lower on uncertain prospects for a resolution in the U.S.-Israeli war with Iran.
“So oil (is) down and the dollar retreating from a six-week high should bode well for gold in the short term here and it has firmed. I expect the trade’s probably going to be a bit cautious here initially. We’ve seen agreements sort of fall apart,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
The yellow metal has fallen more than 14% since the war started in late February, which has disrupted maritime traffic through the Strait of Hormuz, lifting energy prices and stoking inflation concerns.
The dollar pared earlier gains, making greenback-priced bullion more cheaper for other currency-holders, while the U.S. 10-year Treasury bond yields fell 0.2%, decreasing the opportunity cost of holding non-yielding bullion.
“Increasing oil prices, which push inflation higher, are putting pressure on central banks to keep rates unchanged or potentially even increase them. This, thus remains a headwind for gold in the near term,” UBS analyst Giovanni Staunovo added.
Despite being seen as an inflation hedge, gold tends to struggle in periods of elevated interest rates.
Traders now see a 58% chance of at least one 25-basis-point interest rate hike by the U.S. Federal Reserve this year, compared with 48% a day earlier, as per CME’s FedWatch Tool.
Spot silver rose 0.9% to $76.63 per ounce, platinum gained 0.6% to $1,962 and palladium added 1.1% to $1,384.50. (Reporting by Ishaan Arora in Bengaluru; Editing by Leroy Leo and Shailesh Kuber)
