Gold rises on Ukraine concerns, gains curbed by rate hike bets

Gold rose on Thursday as safe-haven support from the Russian invasion of Ukraine was countered by signs that U.S. Federal Reserve officials could act more aggressively to tame inflation.

Spot gold rose 0.1% to $1,945.92 per ounce by 1229 GMT. U.S. gold futures rose 0.8% to $1,953.50.

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"Gold`s upside is severely capped by the Fed`s aggressive bias towards rate hikes, though the precious metal remains well-supported by persistent fears over the Russia-Ukraine war’s global implications," said Han Tan, chief market analyst at Exinity.

Gold is sensitive to rising interest rates, which increase the opportunity cost of holding it.

Last week, the U.S central bank raised borrowing costs by 25 basis points, disappointing sections of the market that had priced in a larger move.

Top Fed policymakers have since batted for a more aggressive approach to monetary policy tightening this year to bring down soaring inflation.

That has propped up the dollar and limited gains in dollar-priced gold, while yields on the U.S. 10-year Treasury note eased but stayed close to their 2019 highs. [USD/][US/]

With bullion-backed exchange-traded funds elevated, "gold could well attract more suitors who hold to the precious metal as a safe haven and an inflation-hedge, especially if stagflation risks become more amplified over the near term," Tan said. [GOL/ETF]

Meanwhile, Britain and its Western allies will examine whether more can be done to prevent President Vladimir Putin from accessing Russia`s gold reserves, Prime Minister Boris Johnson said.

Russian central bank reserves are probably not actively traded, said Bernard Dahdah, an analyst at Natixis.

However, in theory, a move like that would withdraw some gold from the market, likely reducing liquidity and potentially helping gold prices, Dahdah said.

Spot silver rose 0.4% to $25.17 per ounce, platinum inched up 0.2% to $1,021.99, and palladium gained 0.5% to $2,524.78.