Gold slips on higher yields, Ukraine worries limit losses

© Reuters. FILE PHOTO: Marked ingots of 99.99 percent pure gold are placed in a cart at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

(Reuters) – Gold prices fell on Wednesday as U.S. 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.

FUNDAMENTALS

* Spot gold was down 0.2% at $1,918.29 per ounce by 0130 GMT. U.S. gold futures also slipped 0.2% to $1,918.40.

* Benchmark U.S. 10-year Treasury yields jumped to fresh highs since May 2019. [US/]

* 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% probability that the Fed will hike the fed fund rates 50 basis points in May, with only 27.8% expecting a quarter percentage-point hike. Odds for a bigger hike jumped from just over 50% on Monday. [FEDWATCH]

* Gold is sensitive to rising U.S. 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% to $2,537.43 per ounce.

* Spot silver was down 0.1% to $24.73 per ounce, platinum shed 0.6% to $1,017.17.

DATA/EVENTS (GMT)

0700 UK CPI YY Feb

1400 US New Home Sales-Units Feb

1500 EU Consumer Confid. Flash March