Gold slides on Russia-Ukraine talks, U.S. rate hike bets

By Bharat Gautam

(Reuters) - Gold extended its slide on Tuesday as ceasefire talks between Russia and Ukraine reduced demand for safe-haven assets, while bets that the U.S. Federal Reserve may raise interest rates for the first time in three years added to pressure on bullion.

Spot gold was down 1.3% at $1,926 per ounce, as of 1156 GMT, after earlier touching its lowest since March 2 at $1,920.36.

U.S. gold futures fell 1.7% to $1,927.80.

"Some faint hopes that talks between Ukraine and Russia may somehow lead to a de-escalation has affected safe-haven demand for gold," ActivTrades senior analyst Ricardo Evangelista said.

While gold is seeing a bit of a lull, the Ukraine situation is still unfolding, with market volatility and uncertainty likely to remain quite high, Evangelista added.

European stocks fell more than 2% as concerns about surging coronavirus cases in China added to nerves ahead of Fed policy meeting. [.EU] [MKTS/GLOB]

The Fed is expected to raise borrowing costs by a quarter of a percentage point at the end of its two-day meeting on Wednesday.

The impending announcement has kept U.S. 10-year treasury yields elevated and put pressure on gold since rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion. [US/]

"The first rate hike move from the U.S. quite often signals a low point in gold, so we'll see what kind of signal they send tomorrow, and how hawkish their statement is, which will probably determine the short-term outlook from here," said Saxo Bank analyst Ole Hansen.

Meanwhile, spot palladium was up 1.1% at $2,412.55 per ounce, after its weakest session in two years on Monday on easing supply fears.

Palladium is a notoriously low-liquidity market, Hansen said, and with the war premium being taken out of commodity markets, palladium has not been shielded. [O/R]

Spot silver shed 1.6% to $24.62 per ounce, while platinum slipped 1.6% to $1,013.58.

(Reporting by Bharat Govind Gautam in Bengaluru. Editing by Jane Merriman and Louise Heavens)

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