Gold flat as easing Ukraine tensions offset support from subdued yields

Gold was flat on Wednesday, after hitting an eight-month high in volatile trade last session, as easing Russia-Ukraine tensions countered support from weaker bond yields.

Spot gold was little changed at $1,852.62 per ounce, as of 0415 GMT. U.S. gold futures GCv1 dropped 0.1% to $1,854.10.

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Gold prices touched their highest level since June last year on Tuesday, before reversing course to close almost 1% lower.

Asian shares rallied, as fears of a Russian invasion of Ukraine this week dissipated after Moscow indicated it was returning some troops to base from exercises.

The dollar =USD firmed slightly, hurting gold demand from overseas buyers, but a dip in U.S. Treasury yields decreased the opportunity cost of holding non-interest-paying bullion and capped the metal`s losses.

Looking ahead, the more fungible dollar is the preferred safe haven to gold among core investors and could fall on any further de-escalation in the Ukraine crisis, prompting a rally in gold and vice-versa, said Michael Langford, director at corporate advisory AirGuide.

The U.S. Federal Reserve will kick off its tightening cycle in March with a 25 basis-point interest rate hike, a Reuters poll found, but a growing minority says it will opt for a more aggressive half-point move to tamp down inflation.

"Besides weekly momentum indicators and buying the `dip` indicating that the path of least resistance is higher, most traders do expect higher volatility to be a main-stay of gold markets going forth as rumours and market whispers increase," Phillip Futures analyst Avtar Sandu said in a note.

Among other precious metals, spot silver fell 0.1% to $23.33 per ounce and platinum gained 0.2% to $1,027.47, while palladium jumped 2.7% to $2,309.18.