NEW YORK: Gold fell over 1% on Tuesday as a stronger dollar and rising Treasury yields overshadowed safe-haven inflows into bullion.

Spot gold fell 1.1% to $1,956.66 per ounce by 12:35 p.m. ET (1635 GMT). US gold futures dipped 1.5% to $1,957.00.

The dollar index scaled an over two-year peak, making gold more expensive for overseas buyers, on elevated US Treasury yields amid expectations that the Federal Reserve will tighten its monetary policy.

St Louis Fed President James Bullard on Monday repeated his case for increasing interest rates to 3.5% by the end of the year to rein in inflation.

“Hawkish comments from Fed officials are pushing up nominal and real rates in the US, weighing on gold,” said UBS analyst Giovanni Staunovo.

However, “near-term high inflation and geopolitical risks are likely to still support inflows into gold products and likely keep gold trading around current levels over the coming weeks,” Staunovo added.

Russia launched its all-out assault on east Ukraine on Tuesday.

But while gold is considered a safe store of value during political and economic crises, as well as rising inflation, higher interest rates translate into increased opportunity cost of holding non-yielding gold.

“In the near term, we might see some pull back in gold. It might wash all the way down to like $1,920,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, adding gold was also pressured by real yields turning positive for the first time in two years.

Meanwhile, spot silver fell 2.2% to $25.26 per ounce and platinum was down 2.3% to $987.59.

Palladium dropped 2.1% to $2,387.66. The metal used in vehicle exhausts to cut emissions could be pressured by ongoing car production, UBS’ Staunovo said.