Gold slides on strong US inflation data

Bengaluru —  Gold slipped on Friday, as US Treasury yields gained on red-hot inflation data capping bullion’s safe-haven appeal, but prices were set for a second weekly gain after talks between Russia and Ukraine failed to make any progress.

Spot gold shed 0.3% to $1,990.70/oz by 4.17am GMT. US gold futures were down 0.2% to $1,996.30/oz.

“To a large degree it’s going to be a war-driven trade again. But what’s going to cap sentiment in the absence of any wartime escalation is the Federal Open Market Committee, which is going to be a little bit more hawkish than what markets have currently priced in,” said Stephen Innes, managing partner at SPI Asset Management.

Benchmark US 10-year Treasury yields rose after US inflation data saw its sharpest increase in 40 years, locking in expectations that the Federal Reserve will raise interest rates next week, while the European Central Bank took a hawkish turn on Thursday.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion. Investors scurried to safe-haven assets over the Ukraine crisis that led to a rally in gold prices, which have jumped as much as 8.5% in the past two weeks, bringing them closer to their record levels hit in August 2020.

Spot gold may retest a support at $1,976/oz, a break could cause a fall into the $1,924-$1,953 range, according to Reuters technical analyst Wang Tao.

Palladium, used by carmakers in catalytic converters to curb emissions, rose 0.6% to $2,945.52/oz. The metal hit a record high of $3,440.76/oz on Monday, driven by fears of supply disruptions from top producer Russia.

Among other metals, spot silver fell 0.8% to $25.68/oz, while platinum was down 0.6% to $1,062.51/oz and was set for its worst weekly decline since November.

Reuters