Gold drops 1% as dollar strengthens; Ukraine peace talks in focus

By Asha Sistla

(Reuters) - Gold prices fell more than 1% on Monday as the U.S. dollar strengthened and Treasury yields held firm near multi-month highs, with investor focus on potential Russia-Ukraine peace talks further dimming bullion's safe-haven appeal.

 

Spot gold was down 1.2% at $1,934.61 per ounce, as of 0651 GMT. U.S. gold futures fell 1% at $1,935.00.

 

"Gold is falling after its rally stalled on Friday and the U.S. dollar strengthened this morning in Asia," said OANDA senior analyst Jeffrey Halley.

 

The dollar index strengthened to its highest in more than one week, making gold more expensive for other currency holders.

 

The dollar has benefited from its status as a safe haven and the conflict in Ukraine has driven expectations the U.S. Federal Reserve will hike interest rates.

 

Helped by expectations of monetary tightening by the U.S. Federal Reserve, yields on the U.S. 10-year Treasury note US10YT=RR firmed near multi-year highs.

 

"If U.S. March jobs data comes in around 500,000 or higher I see a high chance for gold to fall materially in the short-term as this will support the Fed raising rates faster," said Michael Langford, director at corporate advisory AirGuide.

 

The Fed raised borrowing costs for the first time in three years last week, and traders are pricing in a probability of a 50-basis-points rate hike by the U.S. central bank in May.

 

Higher yields and interest rates increase the opportunity cost of holding non-yielding bullion.

 

With peace talks between Russia and Ukraine set to take place in Turkey this week, Ukrainian President Volodymyr Zelenskiy insisted on the territorial integrity of his country.

 

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to 1,093.18 tonnes on Friday - their highest since late-February 2021.

 

Spot silver slipped 1.7% to $25.08 per ounce and platinum shed 0.8% to $994.19, while palladium was flat at $2,335.17.

 

(Reporting by Asha Sistla in Bengaluru; Editing by Sherry Jacob-Phillips)