LONDON- Gold hit a two-week low on Monday, as investors piled into the dollar with U.S. Treasury yields approaching 3 percent and geopolitical tensions eased.
The yield on 10-year U.S. Treasuries US10YT=RR hit its highest since January 2014, lifting the dollar index DXY to a seven-week peak and making dollar-priced gold costlier holders of other currencies.
But he said the reason yields were rallying was because interest rates were expected to climb due to rising inflation. "If inflation is rising, gold provides a hedge," he said.
Butler said he saw longer term upside risk for gold from rising inflation, returning geopolitical tensions and a U.S. currency stuck in a long-term downtrend as central banks around the world begin raising rates.
Spot gold XAU= was down 0.5 percent at $1,327.93 per ounce at 1005 GMT, after earlier touching its lowest since April 9 at $1,326.91.
U.S. gold futures GCcv1 fell 0.6 percent to $1,329.80 per ounce.
Gold, seen as a safe haven in times of political turmoil, was also under pressure after North Korea said at the weekend it would suspend nuclear and missile tests before planned summits with South Korea and the United States.
Added to this were signs that U.S. China relations might be thawing.
But easing world stocks limited gold's losses, as investors awaited earnings from global tech firms and U.S. bond yields approached peaks that hurt risk appetite in the past. Gold often trades counter to equities, which are seen as risky assets.
A trader in Hong Kong said gold prices were also underpinned by the arbitrage in Asia.
Speculators raised their net long or buy positions in COMEX gold by 5,382 contracts to 143,594 contracts in the week to April 17, U.S. Commodity Futures Trading Commission data showed on Friday.
Spot gold may test support at $1,326 per ounce, following its failure to break resistance at $1,354, Reuters technical analyst Wang Tao said.
Among other precious metals, spot silver fell 1 percent to $16.94 per ounce.
Platinum XPT= was down 0.1 percent at $921.80 an ounce, having hit a two week low of $914.50, while palladium XPD= dropped 1.4 percent to $1,016 an ounce.
(Additional reporting by Apeksha Nair Editing by Edmund Blair) ((email@example.com(00442075429105)(Reuters Messaging: firstname.lastname@example.org))