Gold largely unchanged as Ukraine risks counter rising US Treasury yields

Gold held steady on Tuesday as safe-haven demand spurred by the possibility of new sanctions on Russia countered a rise in US Treasury yields and expectations of interest rate hikes by Federal Reserve

By Seher Dareen

(Reuters) - Gold held steady on Tuesday as safe-haven demand spurred by the possibility of new sanctions on Russia countered a rise in U.S. Treasury yields and expectations of interest rate hikes by the Federal Reserve.

 

Spot gold XAU= was largely unchanged at $1,931.61 per ounce by 10:40 a.m. EDT (1440 GMT), trading in a narrow range. U.S. gold futures GCv1 rose 0.1% to $1,935.20.

 

The European Commission proposed on Tuesday new sanctions against Russia over its invasion of Ukraine, including a ban on purchases of Russian coal and on Russian ships entering EU ports, and said it was working on banning oil imports too. (Full Story)

 

"The geopolitical risks will likely be the primary short-term driver and that would help gold widen that trading range ($1,900-$1,950), where you could see prices possibly even going to $1,975," said Edward Moya, senior market analyst at OANDA.

 

"There's still a good chance that (gold rising to $1,975) could happen, but you never know how the market will react to these (Fed) minutes."

 

Investors awaited the release on Wednesday of the minutes from the Fed's last policy meeting for clues on its rate hike trajectory. Rising U.S. interest rates increase the opportunity cost of holding non-yielding gold, while boosting the dollar.

 

Benchmark 10-year Treasury yields rose after Fed Governor Lael Brainard said she expects methodical rate hikes and rapid reductions to the central bank's balance sheet to bring U.S. monetary policy to a "more neutral position" later this year. (Full Story)

 

The dollar index .DXY also benefited from safe-haven inflows, curbing appetite for gold from overseas buyers. USD/

 

"We're seeing a new peak in the U.S. real yields, and that's really just keeping the (gold) market fairly locked in a range," said Ole Hansen, an analyst at Saxo Bank.

 

Spot silver XAG= rose 0.4% to $24.59 per ounce, platinum XPT= fell 1.8% to $968.84, while palladium XPD= rose 0.7% to $2,291.06.

 

(Reporting by Seher Dareen and Eileen Soreng in Bengaluru Editing by Paul Simao)