Dubai: Gold eased on Tuesday as the US dollar held firm on rising prospects of more sanctions against Russia and possibly bigger interest rate hikes by the Federal Reserve to rein in inflation.
Spot gold was down 0.2 per cent at $1,928.52 per ounce by 0457 GMT. US gold futures were down 0.1 per cent at $1,931.70.
“The more liquid something is, the less the volatility. And, if markets are running away from risk, the dollar then becomes a natural haven just because it is quite simply the most liquid financial instrument in existence,” said Ilya Spivak, a currency strategist at DailyFX.
“Now in real terms, those yields are still negative once we discount break evens. And I think that’s why gold hasn’t fallen more significantly, but if this sort of repricing for a more hawkish Fed continues and we do get positive real rates, I think gold is going to look quite unattractive.”
The dollar index was little changed after three straight sessions of gains as talks of further sanctions against Moscow increased. A stronger dollar makes gold less attractive for other currency holders.
“During these uncertain times, gold remains supported as a critical portfolio hedge that will shine during the most challenging juncture when inflationary pressures remain strong but growth slows,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
Spot silver shed 0.2 per cent to $24.45 per ounce, platinum fell 0.5 per cent to $981.88 and palladium rose 0.5 per cent to $2,286.63.