Gold slips as hawkish Fed outlook takes center stage

GOLD fell on Tuesday as rising US Treasury yields and expectations for more aggressive monetary policy tightening by the Federal Reserve offset safe-haven demand for bullion spurred by possible new Western sanctions on Russia.

Spot gold was down 0.6% at $1,921.47 per ounce by 2:16 p.m. EDT (1816 GMT). US gold futures settled down 0.3% at 1,927.50.

Benchmark 10-year Treasury yield rose after Fed Governor Lael Brainard said she expects methodical rate hikes and rapid reductions to the central bank’s balance sheet to bring US monetary policy to a “more neutral position” later this year.

Expectations for the Fed to be a bit more aggressive in fighting inflationary pressures are weighing on gold, considering “she’s (Brainard) generally considered to be one of the more dovish members of the Fed,” said David Meger, director of metals trading at High Ridge Futures.

Rising US interest rates increase the opportunity cost of holding non-yielding gold. The dollar also advanced, curbing overseas buyers’ appetite for gold.

But price action may also be influenced by the release on Wednesday of the minutes from the Fed’s last policy meeting, which will be scanned for clues on the trajectory of rate hikes, said Edward Moya, senior market analyst at OANDA.

Wall Street indexes fell after Ms. Brainard’s comments, which spooked investors who were already on edge over the prospect of fresh sanctions on Russia.

Spot silver fell 0.8% to $24.30 per ounce, platinum fell 1.9% to $968.09, and palladium fell 1.8% to $2,234.57.

Standard Charted lowered its 2022 palladium forecast to $2,270 an ounce from $2,763.