International gold prices held steady on Friday and a lack of substantial progress in the Russian-Ukrainian peace talks boosted safe-haven gold, but US bond yields soared on fears that the Fed would tighten monetary policy more aggressively, undermining the attractiveness of gold.
At 1618 Beijing time, spot gold rose 0.04% to $1957.92 / oz; the main COMEX gold contract fell 0.19% to $1958.5 / oz; and the dollar index fell 0.17% to 98.636.
Ilya Spivak, foreign exchange strategist at DailyFX, said: "I will attribute the recent gold rally to renewed concerns about Ukraine because we have not yet made the kind of negotiation progress that I think the market hoped for around the beginning of the month."
Western leaders provided military and humanitarian assistance to Ukraine on Thursday. The US and its allies have stepped up pressure on Russia over the invasion of Ukraine, imposing new sanctions on dozens of Russian defence companies, hundreds of members of Congress and the chief executives of the country's largest bank.
The US Treasury also issued guidelines on its website warning that gold-related transactions involving Russia could be subject to sanctions by US authorities, a move aimed at preventing Russia from evading existing sanctions.
But 10-year US Treasury yields remain near 2019 highs, reducing the opportunity cost of holding gold. Spivak also said: "the surge in yields and the Fed is expected to take a rather aggressive approach, preventing gold prices from gaining any meaningful rebound momentum."
Chicago Fed President Evans said on Thursday that the Fed needs to raise interest rates "in time" this year and 2023 to contain high inflation before it takes root in the hearts of the American people and becomes more difficult to get rid of.
The Fed raised interest rates by 25 basis points on March 16, and policymakers have since signalled a more aggressive monetary tightening this year, hinting that they will not rule out raising interest rates by 50 basis points at a time to combat rising inflation. The market expects the fed to raise interest rates to 2.4% by February 2023, with a 76.8% chance that the fed will raise rates by 50 basis points in may.
"there has been more than one slow rise and fall in the gold market recently, and I believe this risk will remain," Jeffrey Halley, a senior analyst at OANDA, said in a report. Although he is optimistic about the long-term trend of gold prices.
