Bond yields rose before a key Federal Reserve meeting where interest rates are expected to be raised, which caused gold prices to plummet massively.
In spite of the Russian invasion of Ukraine and inflation accelerating, demand for the haven asset has eased after the metal surged to $ 2,070 an ounce.
In the face of the war, exchange-traded funds backed by gold have seen sustained inflows, driving total holdings to the highest level in a year.
A new round of interest-rate hikes is poised to be unveiled on Wednesday when the Federal Reserve is expected to begin tightening its monetary policy in response to decades-high inflation caused by surging commodity prices.
- The Fed is now expected to hike rates by about seven quarter points in 2022, according to the markets.
- Treasury yields rose to their highest level since July 2019 on Monday, making non-interest-bearing gold less appealing after rising to their highest level since July 2021.
- Inflation is expected to remain high for some time, which would keep gold and silver prices at a floor for some time if the situation in Ukraine changes.
- As of 6:21 a.m. West African time, spot gold was down more than 1% to $1,932 an ounce after declining 1.9% on Monday.
- As of last week, the price was $2,070.44, near the all-time high from August 2020. The Dollar Spot Index remained steady.
- Tuesday, palladium prices fell 15% following a 15% drop on Monday, the biggest drop since March 2020.
By rerouting shipments, Vladimir Potanin, the biggest shareholder in MMC Norilsk Nickel PJSC, said the company is still exporting even when air links to Europe and the U.S. are suspended.
A fourth round of sanctions for the invasion of Ukraine will include a ban on the sale of luxury goods to Russia above a certain value as well as a ban on the purchase of many steel and iron products from Russia.
The restrictions do not apply to palladium, which is predominantly used in catalytic converters in gasoline engines.