Gold declines as dollar keeps its safe-haven flows

Spot gold (XAU=) was under 0.2% at $1,928.52 per ounce by 0457 GMT. U.S. gold futures (GCv1) were falling 0.1% at $1,931.70.

According to Ilya Spivak, a currency strategist at DailyFX, the more liquid something is, the less the volatility. And, if markets are running away from risk, the dollar evolves into a natural haven because it is quite simply the most liquid financial instrument in existence.

Those yields are still negative once we discount break even in real terms. And he thinks that’s why gold hasn’t fallen more significantly, but if this sort of repricing for a more hawkish Fed continues and we do get favorable accurate rates, gold will look quite unattractive.

The dollar index was little changed after three consecutive sessions of gains as talks of further sanctions against Moscow increased. A stronger dollar makes gold less attractive for different currency holders.

Higher yields increase costs

The United States and Europe were preparing new sanctions to penalize Moscow over civilian killings in Ukraine. President Volodymyr Zelensky warned more deaths were likely to be uncovered in areas seized from Russian invaders.

U.S. two-year Treasury yields rose to their highest level since early-2019, and 10-year yields ticked higher on Monday. Higher yields boost the opportunity cost of holding non-paying bullion.

Stephen Innes, the managing partner at SPI Asset Management, said that during these uncertain times, gold stays supported as a critical portfolio hedge that will shine during the most challenging moment when inflationary pressures remain strong but growth slows.

Spot silver (XAG=) declined 0.2% to $24.45 per ounce, platinum (XPT=) fell 0.5% to $981.88 and palladium (XPD=) rose 0.5% to $2,286.63.