Gold falls on firmer U.S. yields, dollar; palladium sinks 8%

Gold retreated on Monday on pressure from higher U.S. Treasury yields and a firmer dollar, while easing supply concerns ahead of Russia-Ukraine peace talks sent autocatalyst palladium tumbling nearly 8%.

Spot gold fell 1.07% to $1,936.36 per ounce by 12:01 p.m. ET(1601 GMT), while U.S. gold futures declined 0.9% to $1,936.40.

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Benchmark 10-year bond yields hit their highest since April 2019 on the day, buoyed by bets of aggressive interest rate hikes by the Federal Reserve to fight soaring inflation. [US/]

Although gold is considered an inflation hedge, rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion. [USD/]

The weakness in gold should, however, be limited because of inflation worries, said Jim Wycoff, senior analyst at Kitco Metals.

"Anytime we have inflationary pressures like we`re seeing now, history shows that the metals markets have been sought after and I suspect that`s going to continue to be the case."

Making bullion more expensive for holders of other currencies, the dollar rose 0.5%.

Gold`s safe-haven appeal was also pressured by hopes of progress in the first face-to-face peace talks between Ukraine and Russia in more than two weeks.

"We`ve seen a large part of the war premium in gold already taken out, but maybe there`s a little further to go. So, gold is currently facing significant headwinds," independent analyst Ross Norman said.

Palladium was down 5.7% at $2,204.61 per ounce after earlier falling to its lowest level since Jan. 25. The metal has lost nearly 34% since scaling a record high on March 7.

"On palladium, despite the airspace closure between Russia and the U.S. and Europe, alternate routes allow Russia still to export palladium. So I guess some supply disruption concerns are vanishing," UBS analyst Giovanni Staunovo said.

Platinum fell 1.6% to $986.36, while silver fell 1.9% to $25.03.