Gold slides on Russia-Ukraine talks, U.S. rate hike bets

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[March 15, 2022]  By Bharat Gautam

(Reuters) - Gold extended its slide on Tuesday as ceasefire talks between Russia and Ukraine reduced demand for safe-haven assets, while bets that the U.S. Federal Reserve may raise interest rates for the first time in three years added to pressure on gold.

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

Spot gold was down 1.2% at $1,928.58 per ounce, as of 1032 GMT, after earlier touching its lowest since March 3 at $1,924.56.

U.S. gold futures fell 1.5% to $1,930.70.

"Some faint hopes that talks between Ukraine and Russia may somehow lead to a de-escalation has affected safe-haven demand for gold," ActivTrades senior analyst Ricardo Evangelista said.

While gold is seeing a bit of a lull, the Ukraine situation is still unfolding, with market volatility and uncertainty likely to remain quite high, Evangelista added.

Gold prices are set to fall for a third straight session, which could be their longest losing streak since late January.

The Fed is expected to raise borrowing costs by a quarter of a percentage point at the end of its two-day meeting on Wednesday.

The impending announcement has kept U.S. 10-year treasury yields elevated and put pressure on gold since rising U.S. 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.

Meanwhile, spot palladium was up 1.7% at $2,428.72 per ounce, after its weakest session in two years on Monday on easing supply fears.

Palladium is a notoriously low-liquidity market, Hansen said, and with the war premium being taken out of commodity markets, palladium has not been shielded. [O/R]

Spot silver shed 1.8% to $24.58 per ounce, while platinum slipped 1.8% to $1,012.04.

(Reporting by Bharat Govind Gautam in Bengaluru. Editing by Jane Merriman)

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