Gold prices were still in the red on Monday afternoon but spot bullion managed to edge above the $5,000 mark after starting the session lower, amid diminishing expectations of near-term US interest rate cuts driven by elevated energy costs.

Gold futures (GC=F) lost 0.5% to $5,035.50 a troy ounce, while spot prices bounced back to $5,019.10 at the time of writing.

ANZ analysts said in a note: “Gold has struggled as it is being overshadowed by a stronger USD, rising yields and uncertainty surrounding Federal Reserve policy.”

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Rising crude prices feed into inflation by increasing transportation and production costs. Gold (GC=F) is traditionally seen as an inflation hedge, but higher interest rates make yield-bearing assets more attractive, reducing bullion’s appeal.

Christopher Wong, a strategist at OCBC, said, “In the near term, [gold's] price action may remain choppy as markets reassess the Fed policy path and the trajectory of real yields.”

The Federal Reserve is widely expected to keep interest rates on hold in the 3.5-3.75% ⁠range for a second consecutive meeting on Wednesday.

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