Gold declined for a third day after government bond yields climbed ahead of a key US central bank meeting where policy makers are set to raise interest rates.
Gold prices hit their lowest in nearly two weeks on Tuesday, as US government bond yields climbed ahead of an expected rate hike from the Federal Reserve, while hopes for progress in Russia-Ukraine talks further dampened the metal's safe-haven appeal.
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Globally, gold prices were down 1 per cent at $1,931.70 per ounce, after touching it's lowest since March 3 at $1,924.56 earlier in the session. US gold futures, which is indicative of near-term movement, fell 1.5 per cent to $1,931.70. Gold fell 1.9 per cent Monday, after touching $2,070.44 last week, near the all-time high reached in August 2020.
"The market may be getting a touch less concerned with regards to the very terrible situation that we have in the Ukraine, and that has just taken out support from safe-haven assets (like gold)," said Dominic Schnider, head of commodities and APAC forex at UBS Wealth Management in Hong Kong.
Russian and Ukrainian delegations held a fourth round of talks on Monday but no new progress was announced. Discussions are due to resume on Tuesday.
Gold woes deepen
"Adding to gold's woes, the market seems to be belatedly waking up to the implications of a hawkish FOMC meeting this week, and the rise in US yields will not help gold's cause," said OANDA senior analyst Jeffrey Halley in a note.
US government bond yields jumped to more than two-and-a-half-year highs earlier, ahead of the Fed's highly anticipated first rate hike in three years on Wednesday.
Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.
Bullion has eased after rallying to within $5 of a record last week as Russia's invasion of Ukraine and accelerating inflation boosted demand for the haven asset. The war has led to sustained inflows into bullion-backed exchange-traded funds, driving total holdings to the highest level in a year, according to initial data compiled by Bloomberg.
Inflation, commodity prices weigh
Months of speculation about a new wave of interest-rate hikes look to be coming to a head on Wednesday, when the US central bank is expected to begin tightening to rein in decades-high inflation, which is being exacerbated by surging commodity prices.
Markets now indicate they expect about seven quarter-point Fed rate hikes in 2022. The 10-year government bond yield extended gains after rising to its highest level since July 2019 on Monday, which reduced the appeal of non-interest-bearing gold.
"Price action will depend on Fed commentary in the short-term, but I wouldn't be surprised to see gold rally on the day of the Fed hike, as long as the commentary isn't too hawkish," said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. "
Any shifts in the current situation in Ukraine will likely outweigh the focus on the Fed, and inflation is tipped to remain elevated for some time which could keep a floor in gold and silver prices."