Gold subdued as U.S. rate hike expectations dent appeal By Reuters

© Reuters. FILE PHOTO: Marked ingots of 99.99 percent pure gold are TR Forex pays commissions on the 5th of every monthplaced in a cart at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk/

By Eileen Soreng

(Reuters) - Gold prices traded in a narrow range on Friday caught between expectations of aggressive U.S. interest rate increases and jitters over high inflation and the economic fallout of the Ukraine crisis.

Spot gold was flat at $1,931.53 per ounce by 0858 GMT but up 0.4% for the week. U.S. gold futures were down 0.2% to $1,933.80.

"On one side we have geopolitical risks generated by the war in Ukraine and rising inflation offering support to the precious metal ... on the other side we have the Federal Reserve's increasingly hawkish stance," said ActivTrades senior analyst Ricardo Evangelista.

"Until one of these factors gains clear preponderance over the other, gold prices are likely to remain within the current range."

Earlier in the day, the dollar index hit its highest since May 2020, bolstered by minutes of the Fed's March policy meeting that showed "many" policymakers were prepared to raise rates in half-percentage-point increments in coming meetings to curb inflation. [USD/]

The benchmark U.S. 10-year Treasury yield touched a three-year high. [US/]

Gold is highly sensitive to rising U.S. interest rates and Treasury yield, which increase the opportunity cost of holding the non-yielding bullion, while boosting the greenback in which it is priced.

Meanwhile, Russia gave the most sombre assessment yet of its invasion of Ukraine, describing the "tragedy" of mounting troop losses and the economic hit from Western sanctions.

"The opposing forces of inflation and rising rates will likely be the strongest influences on gold in the second quarter," the World Gold Council said in a report.

"The post-COVID economic recovery and supply side disruptions, which have been exacerbated by the Russia–Ukraine war, will likely keep inflation higher for longer."

Spot silver rose 0.4% to $24.66 per ounce.

Palladium was 1.2% higher at $2,260.41 per ounce and platinum eased 0.1% to $961.67. Both metals were set for a fifth-consecutive weekly loss.

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