* SPDR Gold Trust holdings at 1-1/2-month high
* Dollar slips to near three-month low
* Silver hits highest level since February (Updates prices)
May 18 (Reuters) – Gold hit a near four-month peak on Tuesday but eased fractionally as U.S. yields inched higher, with a weaker dollar and inflation fears maintaining a floor under bullion prices.
Spot gold fell 0.1% to $1,863.91 per ounce by 12:00 p.m. EDT (1600 GMT), after hitting its highest since Jan. 29 earlier in the session. U.S. gold futures fell 0.1% at $1,866.40.
“Yields just picked up just a notch,” said Phillip Streible, chief market strategist, Blue Line Futures in Chicago.
“The weaker dollar has provided most of the support. (But) gold has had a pretty good run, but it’s not in a bullish market at all.”
Benchmark U.S. Treasury yields inched higher, increasing the opportunity cost of holding gold.
The dollar index fell to a near three-month low, making gold cheaper for other currency holders.
“The narrative is clearly shifting towards inflation … but perhaps more critically, you have got the U.S. dollar weakness, which is probably the key and prime driver,” said independent analyst Ross Norman.
Analysts also noted that inflows into gold exchange-traded-funds indicated investors were buying gold to hedge against inflation worries.
In the wake of rising prices in the United States, minutes of the Federal Reserve’s last policy meeting due on Wednesday are expected to provide further clarity on monetary policy outlook and policymakers’ views on inflation.
“Fed will not be tempted to rock the boat in terms of the recovery which is gathering some momentum. Raising rates or discussion on tapering would probably be counterproductive at this stage,” Norman said.
Gold is also getting support from chart-based buyers after the bullion broke above its 200-day moving average, considered to be a bullish signal.
Elsewhere, silver slipped 0.6% to $28 per ounce, after hitting its highest since Feb. 2 in the session.
Palladium was flat at $2,900.44 per ounce, while platinum dipped 2.1% to $1,213.19.
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