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Gold prices were steady on Tuesday, as concerns about a faster pace of policy tightening by the US central bank countered safe-haven demand fuelled by escalating tension over Ukraine.

Spot gold was little changed at $1,841.44 per ounce by 0512 GMT. US gold futures were also steady at $1,842.10.

Key factors affecting gold prices are risk-off sentiment due to the tension, rising Treasury yields on Fed tapering expectations and hedge funds reducing net long positions, said Michael Langford, director at corporate advisory AirGuide.

"The market does not know which way a potential conflict in Ukraine will affect global markets," Langford said. "There is a massive amount of speculation taking place and (I) expect gold prices to remain volatile in the short term."

On Monday, NATO said it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western "hysteria" in response to its build-up of troops on the Ukraine border.

Investors are focused on the Fed's two-day policy meeting starting later in the day, amid expectations the US central bank will signal plans to raise rates by 25 basis points in March.

Gold is generally seen as an inflationary hedge, but it is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-interest bearing bullion.

Gold lingers near 2-month highs; palladium climbs

"Gold could be trading more on near-term inflation dynamics as well as some scepticism about the potential for inflation to normalize as dramatically as markets imply over the long-term," J.P. Morgan analysts said in a note.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to their highest since late August 2021 last Friday.

Spot silver fell 0.7% to $23.79 an ounce. Palladium shed 0.5% to $2,137.00 and platinum slipped 0.8% to $1,018.50.

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