Gold slips on higher yields, Ukraine worries limit losses

[BENGALURU] Gold prices fell on Wednesday (Mar 23) as US Treasury yields gained after Federal Reserve officials insisted on sharper interest-rate hikes to combat inflation, although concerns over the Ukraine crisis slowed bullion's decline.

Spot gold was down 0.2 per cent at US$1,918.29 per ounce by 1.30 am GMT. US gold futures also slipped 0.2 per cent to US$1,918.40.

Benchmark US 10-year Treasury yields jumped to fresh highs since May 2019.

Fed officials are helping shape market expectations for sharper interest-rate hikes to curb the surge in inflation, but have not managed to dispel fears the tightening cycle could blow a hole in the economy and labour market.

The market is pricing in a 72.2 per cent probability that the Fed will hike the fed fund rates 50 basis points in May, with only 27.8 per cent expecting a quarter percentage-point hike. Odds for a bigger hike jumped from just over 50 per cent on Monday.

Gold is sensitive to rising US interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion.

Capping gold's losses, the West planned to announce more sanctions against the Kremlin amid a worsening humanitarian crisis despite talks between Ukraine and Russia, being confrontational but inching forward.

Analysts have also said economic and political risks linked to Russia's invasion of Ukraine would continue to be closely monitored by the gold market, with any big developments likely to trigger sharp price action in either direction.

Palladium, used by automakers in catalytic converters to curb emissions, rose 2.1 per cent to US$2,537.43 per ounce.

Spot silver was down 0.1 per cent to US$24.73 per ounce, platinum shed 0.6 per cent to US$1,017.17. REUTERS