Gold retreats, palladium sinks 9%, on progress in Ukraine talks

Gold prices fell more than 1% to a one-month low while palladium sank nearly 9% on Tuesday, as signs of progress in Russia-Ukraine peace talks dented demand for precious metals.

Spot gold fell 0.54 % to $1,912.82 per ounce. U.S. gold futures dropped 1.5% to $1,910.70.

Silver and platinum both fell 1.1% to $24.56 per ounce and $973.84 respectively.

“We are seeing a free fall in metals after a potential major de-escalation from Russia providing a big spark for risk appetite and optimism that we could see a potential end to this war,” said Edward Moya, senior market analyst at OANDA.

Moscow has decided to drastically cut its military activity around Kyiv and Chernihiv in Ukraine, one of its deputy defence ministers said after talks between Russian and Ukrainian teams in Istanbul.

Hopes for an end to the conflict now in its second month lifted risk sentiment in wider financial markets.

Benchmark 10-year bond yields held firm near multi-year highs on bets for aggressive interest rate hikes by the Federal Reserve to fight soaring inflation.

Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion.

Phillip Streible, chief market strategist at Blue Line Futures in Chicago, expects “gold to be anchored around $1,900 at the moment.”

“These talks could fall apart and you could see gold rally right back to $1,950 level,” Streible said.

Spot palladium dropped 5.1% to $2,120.56 per ounce, after falling to its lowest level since Jan. 21 at $2,032.97 earlier in the session.

The auto-catalyst metal has tumbled nearly 40% since scaling an all-time peak on March 7 as supply concerns from Russia eased.

“Anything that’s coming out of Russia and was concerned about supply disruption has corrected lower, including palladium,” Streible said.