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Investors assess new tariffs and gold falls as US bond yields increase

Gold prices fell on Tuesday as a result of higher U.S. Treasury rates, following the announcement by U.S. president Donald Trump that he would be imposing new tariffs on trade partners such as Japan and South Korea.

As of 0905 GMT, spot gold fell 0.3% to $3324.19 an ounce. U.S. Gold Futures dropped 0.3% to $3333.60.

The yield on the benchmark 10-year U.S. notes reached a two week high, which made non-yielding gold less attractive.

Giovanni Staunovo, a commodity analyst at UBS, said: "Gold is caught between a stone and a brick wall."

The U.S. decision of extending the deadline for trade deals for many partners is negative for gold prices. Positive for gold prices is that U.S. key trading partners in Asia may have to face higher tariffs soon, which could weigh on economic growth prospects.

Trump announced on Monday that he would be imposing tariffs of up to 40% in the next phase of his trade war, which he began in April.

Trump stated that the new deadline is firm and he will consider extensions only if other countries make proposals for a deal.

To allow time for negotiations, "reciprocal tariffs", which were supposed to be limited to 10%, had been set to 10% up until July 9, but so far only agreements with Britain and Vietnam have been made. Washington and Beijing reached an agreement in June on a framework for tariff rates.

China warned Trump's administration to avoid re-igniting trade tensions and has threatened to retaliate by cutting the U.S. out of its supply chain if it does.

Trump's tariffs are fueling inflation fears and complicating the path of the U.S. Federal Reserve to lower interest rates.

Investors are waiting for the minutes of the Fed’s June meeting due on Wednesday to get more insight into the bank’s policy outlook.

Silver spot was unchanged at 36.72 dollars per ounce. Platinum fell by 0.3% to 1,366.25 dollars, and palladium increased 0.5% to 1,116.86. (Reporting from Brijesh Patel and Anmol Chaubey in Bengaluru).

(source: Reuters)