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Gold slipped on Tuesday as higher US Treasury yields and expectations of aggressive interest rate hikes by the Federal Reserve dimmed the appeal of the non-yielding bullion.

Spot gold was down 0.3% at $1,926.80 per ounce as of 1150 GMT, trading in a narrow range. US gold futures eased 0.1% to $1,931.20.

“The market remains torn between those investors looking towards gold as an offset against inflation, growth worries and high volatility in the bond market … against that we have the continued rise in yields,” Saxo Bank analyst Ole Hansen said.

“We’re seeing a new peak in the US real yields and that’s really just keeping the (gold) market fairly locked in a range.”

Yields on 10-year Treasury Inflation Protected Securities, or real yields, rose to a near two-year high on Tuesday.

US 2-year Treasury yields were near their highest level since early 2019, while the 10-year yields also gained. The dollar index steadied after rising for three straight sessions supported by safe-haven flows on prospects of more sanctions on Russia.

Markets are looking forward to Wednesday’s release of minutes from the Fed’s last policy meeting for signs if the central bank will raise its benchmark overnight interest rate by 50 basis points next month to rein in inflation.

Rising US interest rates increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which the metal is priced.

“The market seems to believe that the Fed will succeed in regaining control of the current very high inflation by raising interest rates,” Commerzbank analyst Daniel Briesemann said.

“The fact that gold is holding its ground despite the increased real interest rates is a sign of strength.”

Spot silver rose 0.6% to $24.65 per ounce, platinum fell 0.7% to $980.05 and palladium gained 1.1% to $2,301.82.

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