Gold eases as U.S. Fed's plan to curb inflation lifts yields

© Reuters. FILE PHOTO: Granules of gold and silver are seen in glass jars at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

By Bharat Gautam

(Reuters) - Gold prices fell on Tuesday, tracking a retreat in crude oil prices, with pressure also coming from the U.S. Federal Reserve head's hawkish approach to tackling inflation which lifted Treasury yields.

Spot gold XAU= fell 0.4% $1,928.30 per ounce by 1053 GMT. U.S. gold futures GCv1 dipped 0.1% to $1,928.00.

Fed Chair Jerome Powell said on Monday the central bank must move "expeditiously" to raise interest rates to rein in lofty inflation, possibly "more aggressively," to keep an upward price spiral from getting entrenched.

Gold is taking Powell's comments relatively well due to support from an overnight spike in crude oil prices, which is inflationary and hurts growth, said Saxo Bank analyst Ole Hansen. O/R

Crude oil prices drifting lower on the day is weighing on gold, he said.

The yield on the benchmark 10-year U.S. Treasury note hit its highest since May 2019, also pressuring the zero-interest yielding gold, as traders wagered on big rate hikes from the Fed through the rest of the year. US/

But "this has apparently led some market participants to worry that the Fed might go too far and cause the economy to slump with too-rapid rate increases," which likely helped gold on Monday, Commerzbank (DE:CBKG) analyst Daniel Briesemann said in a note.

Analysts have also said economic and political risks linked to Russia's invasion of Ukraine would continue to be closely monitored by the gold market, with any big developments likely to trigger sharp price action in either direction.

Rising Gold ETF (NYSE:GLD) (exchange traded funds) holdings show that despite day-to-day price fluctuations, asset managers are moving back into gold to diversify, and as a hedge against inflation and an economic downturn, Ole Hansen added. GOL/ETF

Spot silver XAG= dropped 0.4% to $25.09 per ounce and platinum XPT= slipped 0.9% to $1,028.01. Palladium XPD= fell 1.9% to $2,535.18 per ounce.