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Gold prices fell on Tuesday as U.S. Treasury yields hit fresh multi-year highs following Federal Reserve chair Jerome Powell’s aggressive inflation stance, while safe-haven bullion remained underpinned by escalation in the Ukraine crisis.
FUNDAMENTALS
Spot gold was down 0.2% at $1,931.84 per ounce by 0105 GMT. U.S. gold futures were flat at $1,930.20.
Powell indicated that the U.S. central bank would raise interest rates by bigger-than-usual amounts if necessary to bring down inflation that was running “much too high.”
The yield on the benchmark 10-year Treasury note jumped above 2.3% for the first time since May 2019, while a closely watched gap between rates for two- and 10-year Treasury notes flattened further, a potential sign of an economic downturn.
Sharp moves in the U.S. Treasury market are increasingly pointing to the risk of an approaching recession, with markets doubting the Fed’s plan to engineer a “soft landing” for the economy as it hikes interest rates to fight inflation, market experts said.
Higher yields and interest rates tend to increase the opportunity cost of holding non-interest paying gold.
Slowing gold’s slide, Ukraine said on Monday it would not obey ultimatums from Russia after Moscow demanded it stop defending besieged Mariupol, intensifying the conflict.
Meanwhile, European Union governments will consider whether to impose an oil embargo on Russia over its invasion of Ukraine when they gather this week with U.S. President Joe Biden for a series of summits.
Palladium , used by automakers in catalytic converters to curb emissions, fell 0.5% to $2,571.64 per ounce.
The auto-catalyst metal hit a record high of $3,440.76 on March 7, driven by fears of supply disruptions from top producer Russia.
Spot silver was down 0.2% to $25.15 per ounce, platinum shed 0.3% to $1,033.99.