US MIDDAY: Gold firms as war in Ukraine, inflation take centre stage

NEW YORK: Gold edged higher on Wednesday on a retreat in the dollar as well as worries over inflation and slowing economic growth due to the war in Ukraine, while looming US interest rate hikes capped gains.

Spot gold rose 0.2% to $1,952.74 per ounce by 12:57 p.m. ET (1657 GMT), recovering from a near two-week low touched earlier.

US gold futures fell 0.2% to $1,954.90.

“We’re getting closer to a buying opportunity in gold... we had a nice little corrective sell off and there is an opportunity here to move higher,” said Daniel Pavilonis, senior market strategist at RJO Futures.

On Tuesday, gold fell as much as 1.8% as hawkish comments from Fed officials propelled the dollar and 10-year Treasury yields to multi-year highs.

While gold is considered a hedge against inflation, rising US interest rates increase the opportunity cost of holding the non-yielding bullion.

San Francisco Federal Reserve President Mary Daly on Wednesday said she expects inflation to start dropping and to be at the Fed’s 2% goal in five years. Fed funds futures traders are expecting the benchmark rate to rise to 1.32% in June, and to 2.80% next February, from 0.33% now.

Gold has performed relatively well, up about 7% this year, despite the rising real yields and a stronger dollar, Saxo Bank analyst Ole Hansen said in a note.

Inflation and growth concerns have both been “turbocharged by the war” and combined with volatility in equities and bond markets, investors have been increasingly looking for safe havens, Hansen added.

Spot silver slipped 0.1% to $25.14 per ounce, platinum fell 0.5% to $986.00.

Palladium continued its volatile run and rose to $2,473.12, after having risen as much as 4.8% in the session.

Market focus continues to be on a likely dip in supply of the metal used in vehicle exhausts to curb emissions from key producer Russia.