Gold falls 1% as U.S. dollar rises

Gold prices dropped on Monday, weighed by a spike in U.S. Treasury yields and a stronger dollar, and as hopes of progress in Russia-Ukraine peace talks dented demand for the safe-haven metal

Spot gold fell 1.1% to $1,935.64 per ounce. U.S. gold futures dropped 0.9% to $1,936.50

“Adding to the woes for gold at the moment we got significant dollar strength and significant increases in the 10-year Treasury yields,” said independent analyst Ross Norman. “We’ve seen a large part of the war premium in gold already taken out, but maybe there’s a little further to go. So, gold is currently facing a significant headwinds on all three fronts

The benchmark U.S. 10-year yields rose above 2.5% to their highest level since May 2019 as bets of big rate hikes by the Federal Reserve to fight soaring inflation hammered bond markets

Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced

The dollar index rose to a more than one-week high, making gold more expensive for other currency holders

“We believe the rise in yields and thus the increase in real interest rates are due to the higher interest rate expectations of market participants,” Commerzbank analysts said in a note. “In our view the gold price is holding its own impressively well against this backdrop. ETF investors have also not allowed themselves to be deterred as yet

With peace talks between Russia and Ukraine set to take place in Turkey this week, Ukrainian President Volodymyr Zelenskyy has insisted on the territorial integrity of his country after earlier suggesting he was ready for a compromise