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Gold prices have slipped from its eight-month high on expectations that tensions between Russia and Ukraine will ease.
Spot gold was last trading at $1,891.72 per ounce on Friday, falling from its peak of above $1,900 an ounce the day before.
Looking ahead, analysts see gold prices moderating on interest rate hike expectations and quantitative easing measures.
The market expects the Fed to begin raising interest rates as early as March, as part of measures to rein in spiralling inflation. Many investors turn to gold as a hedge against inflation.
According to Refinitiv data, support levels for the remainder of February are seen around $1,778 an ounce, while resistance is likely to develop around the $1,876 level.
Ehsan Khoman, head of emerging markets research at MUFG, said headwinds from rising US real yields are bearish for gold and silver. A stronger US dollar could also signal weak investment demand for the metals.
“For gold to roll over, real yields need to follow nominal yields higher, but elevated inflation prints have so far prevented this from happening. With the tide expected to turn, and real yields to surpass the move higher in nominal Treasury yields, with 10-year real yields rising to -0.30 percent by the end of 2022, this would be on net bearish for gold…” he added.
Analysts at Fitch Solutions are also negative on gold and see prices averaging lower in 2022, as the US dollar strengthens, and bond yields continue to recover.
"We see prices averaging $1,700 an ounce in 2022 with continued bouts of volatility, compared to $1,798 an ounce reached in 2021."
Gold will remain supported in the near term, as inflation runs at a multi-year high, which will maintain the appeal of the precious metal.
However, this will be balanced by rising risks of the US Fed increasing interest rates at a pace faster and stronger than currently expected, they said.
(Reporting by Brinda Darasha; editing by Cleofe Maceda)
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