Gold rally slows as risk appetite improves; focus on Ukraine

Gold rally slows as risk appetite improves; focus on Ukraine

Gold dipped on Wednesday as riskier assets bounced back, with bullion investors awaiting further developments on the Ukraine crisis, while also preparing for impending policy tightening by major central banks.

Spot gold dropped 0.2% to $1,894.82 per ounce by 1035 GMT, retreating from a near nine-month high of $1,913.89 hit on Tuesday. U.S. gold futures shed 0.6% to $1,896.10.

"Gold has moderated below the psychologically-important $1,900 level as sanctions imposed on Russia didn't live up to the market’s worst fears," Han Tan, chief market analyst at Exinity said.

Western nations on Tuesday imposed new sanctions on Russia for ordering troops into separatist regions of eastern Ukraine and threatened to go further if Moscow launched an all-out invasion of its neighbour.

Global stocks broke a four-day slide on Wednesday, with investors awaiting Russia's next move.

"Should fears over geopolitical tensions subside, that would leave the Fed’s policy tightening path as bullion’s primary driver, with further climbs in real Treasury yields likely to unwind the geopolitical risk premiums currently baked into gold prices," Tan said.

Federal Reserve officials last week quelled what had been rising market expectations for an aggressive initial response to 40-year-high U.S. inflation, signalling that steady interest rate hikes should be enough.

U.S. 10-year Treasury yields