By Brijesh Patel
(Reuters) – Gold fell nearly 2% on Tuesday to a two week trough as hopes of progress in peace talks between Russia and Ukraine coupled with the likelihood of an U.S. interest rake hike dented demand for the safe-haven asset.
Spot gold dropped 1.7% to $1,917.70 per ounce as of 09:37 a.m. ET (1337 GMT), after earlier touching its lowest since March 1 at $1,913.10.
U.S. gold futures fell 2% to $1,921.10.
“There’s lesser need for safe havens at the moment given peace talks in Ukraine, the upcoming Federal Reserve rate hike and some pullback in commodity prices across the board,” said David Meger, director of metals trading at High Ridge Futures.
Talks between Russia and Ukraine, discussing a ceasefire and a withdrawal of Russian troops from Ukraine, are ongoing, one of Ukraine’s negotiators said.
The Fed is widely expected to raise interest rate by 25 basis points on Wednesday to fight soaring inflation.
The prospect of the first U.S. rate hike in three years lifted U.S. 10-year treasury yields to multi-month highs. Higher interest rates increase the opportunity cost of holding non-yielding bullion. [US/]
“The first rate hike move from the U.S. quite often signals a low point in gold, so we’ll see what kind of signal they send tomorrow, and how hawkish their statement is, which will probably determine the short-term outlook from here,” said Saxo Bank analyst Ole Hansen.
A slide in oil prices also weighed on bullion’s appeal as an inflation hedge. [.N] [O/R]
Spot palladium was up 1.1% at $2,412.55 per ounce, after its weakest session in two years on Monday as supply fears receded.
“Monday’s marked price slide shows the extent to which the palladium price had been driven up beforehand by the fear of supply outages,” Commerzbank analyst Carsten Fritsch said.
Silver fell 0.9% to $24.78, while platinum slipped 3.2% to $996.79.
(Reporting by Brijesh Patel in Bengaluru; Editing by Amy Caren Daniel)
