Gold prices steady as Ukraine concerns offset rate hike bets

By Bharat Gautam

(Reuters) - Gold struggled for direction on Thursday as safe-haven support from the Russian invasion of Ukraine was countered by signs that U.S. Federal Reserve officials could act more aggressively to tame inflation.

Spot gold was last up 0.1% at $1,945.56 per ounce by 1026 GMT. U.S. gold futures rose 0.3% at $1,943.10.

"Gold's upside is severely capped by the Fed's aggressive bias towards rate hikes, though the precious metal remains well-supported by persistent fears over the Russia-Ukraine war's global implications," said Han Tan, chief market analyst at Exinity.

Gold is highly sensitive to rising interest rates, which raise the opportunity cost of holding bullion.

Last week, the U.S central bank raised borrowing costs by 25 basis points, disappointing sections of the market that had priced in a larger move. Top Fed policymakers have since batted for a more aggressive approach to monetary policy tightening this year to bring down soaring inflation.

That has propped up the dollar and yields on the U.S. 10-year Treasury note, pressuring greenback-priced, zero-yield gold. [USD/] [US/]

With bullion-backed exchange-traded funds elevated, "gold could well attract more suitors who hold to the precious metal as a safe haven and an inflation-hedge, especially if stagflation risks become more amplified over the near term," Tan said. [GOL/ETF]

Meanwhile, Britain and its western allies will examine whether more can be done to prevent President Vladimir Putin from accessing Russia's gold reserves, Prime Minister Boris Johnson said.

Russian central bank reserves are probably not actively traded, said Bernard Dahdah, an analyst at Natixis.

However, in theory, a move like that would withdraw some gold from the market, likely reducing liquidity and potentially helping gold prices, Dahdah said.

Spot silver was steady at $25.07 per ounce, platinum fell 0.8% to $1,012.49, and palladium dipped 0.3% to $2,504.70.

 

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by Aditya Soni)