Wednesday, May 18

Gold drops to 2-week low on Russia-Ukraine talks, rate hike prospects


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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 US 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 am ET (1337 GMT), after earlier touching its lowest

since March 1 at $1,913.10.

US 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

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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 US rate hike in three years

US lifted 10-year treasury yields to multi-month highs. Higher

interest rates increase the opportunity cost of holding

non-yielding bullion.

“The first rate hike move from the US 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

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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.

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)



financialpost.com