Gold dips on Putin’s comments on Ukraine talks, U.S. rate hike bets

Granules of gold and silver are seen in glass jars at the Krastsvetmet non-ferrous metals plant in Krasnoyarsk
FILE PHOTO: Granules of gold and silver are seen in glass jars at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

March 11, 2022

By Seher Dareen

(Reuters) – Gold retreated on Friday as Russian President Vladimir Putin’s comments on making some progress in talks with Ukraine eased demand for the safe-haven asset that was further pressured by the likelihood that the U.S. interest rates were set to rise.

Spot gold was down 1.1% to $1,973.80 per ounce by 1531 GMT, but remained poised for a weekly rise of about 0.3% as concerns over the course of the Ukraine conflict kept investors on their toes. U.S. gold futures fell 0.9% to $1,981.80.

“Many positive fundamental factors, like inflation and supply chain disruption still remain… but in the short term, we might have priced a good amount of those into the market,” said David Meger, director of metals trading at High Ridge Futures, adding Friday’s moves were a correction off of recent highs.

With U.S. inflation ballooning in February, bets that the central bank will raise its benchmark overnight interest rate by at least 25 basis points on March 16, stood at 94%, according to CME’s FedWatch Tool

Meanwhile, benchmark U.S. 10-year Treasury yield rose, raising the opportunity cost of holding non-yielding bullion, while equities extended gains amid some progress in Russia-Ukraine talks.

“The market’s obviously pricing in subsequent rate hikes. But the path of those rate hikes is clearly what the market will be focused on, moving forward,” Meger added.

Spot palladium slipped 5.6% to $2,764.19 per ounce, en route to a 7.8% loss for the week, despite hitting a record high this week driven by fears of supply disruption from top-producer Russia.

Silver fell 0.5% to $25.76 per ounce. Platinum was up 0.1% to $1,069.80, yet headed for its biggest weekly decline since November.

“The Russia-Ukraine crisis will continue to support the prospect for higher precious metal prices… due to what this tension will mean for inflation (up), growth (down) and central banks’ rate hike expectations (fewer),” Saxo Bank analyst Ole Hansen said.

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by Maju Samuel)