Gold subdued as stronger dollar counters Ukraine risks

Gold traded in a tight range on Friday as the dollar climbed higher on prospects of aggressive interest rate hikes by the U.S. Federal Reserve, partially offsetting safe-haven demand fuelled by the heightened Russia-Ukraine conflict.

Spot gold was flat at $1,929.52 per ounce by 0520 GMT. U.S. gold futures were down 0.3% at $1,931.90.

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"Gold has held up relatively well this week given the move higher by both U.S. yields and the U.S. dollar, we may be seeing some underlying haven and inflation hedging buying supporting the downside," said OANDA senior analyst Jeffrey Halley.

The U.S. dollar climbed to a near two-year high against a basket of currencies and set for its best week in a month, backed by hawkish remarks from several Federal Reserve policy makers who are calling for a faster pace of interest rate increases to curb rapid inflation.

A stronger U.S. dollar makes gold less attractive for other currency holders.

The benchmark U.S. 10-year Treasury yield touched a three-year high in the previous session, increasing the opportunity cost of holding non-yielding bullion. 

Gold, however, is being supported by the Ukraine uncertainty, rapid inflation, and the still persistent COVID-19 pandemic but the Fed`s aggressive stance to combat inflation, recovering bond yields, stronger dollar and easing of pandemic restrictions on higher vaccination rates will put a lid on gold prices, Fitch Solutions said in a note dated April 7.

Russia gave the most sombre assessment so far of its invasion of Ukraine, describing the "tragedy" of mounting troop losses and the economic hit from sanctions, as Ukrainians were evacuated from eastern cities before an anticipated major offensive.

Spot silver was flat at $24.57 per ounce.

Platinum was down 0.2% at $961.05 and palladium rose 1.5% to $2,267.55. Both metals were set for a fifth-consecutive weekly loss.