Gold dips, but set for weekly gain on safe-haven demand

NEW YORK (April 14) - Gold eased on Thursday after the dollar strengthened and yields rose as investors geared up for U.S. interest rate hikes, but safe-haven demand triggered by the Ukraine crisis and mounting inflation kept bullion on track for a weekly gain.

Spot gold fell 0.5% to $1,968.83 per ounce by 12:22 p.m. ET (1621 GMT).

U.S. gold futures dropped 0.6% to $1,972.30.

While central banks the world over are racing to tame surging inflation, the European Central Bank on Thursday stuck to its plans to dial back stimulus this year, a move seen as less aggressive in the face of soaring inflation. read more

"You've had a dovish surprise from the ECB, which is really providing strength here for the dollar. So gold is getting hit hard here," said Edward Moya, a senior analyst with OANDA.

The dollar (.DXY) rose 0.5%, making bullion expensive for overseas buyers.

Also hitting gold on the day, the benchmark 10-year U.S. Treasury yield rose.

Although gold is considered a hedge against inflation and geopolitical risks, interest rate hikes raise the opportunity cost of holding non-yielding bullion.

The Nasdaq and the S&P 500 fell as rising yields weighed on megacap growth stocks.

New York Fed President John Williams said the central bank should consider raising rates by a half percentage point at its next meeting in May. read more

However, gold was still headed for a second straight weekly gain, up about 1.2% thus far.

"Russia appears to be preparing to launch a major offensive in the east of the country (Ukraine) – that is generating considerable demand for gold as a safe haven," Commerzbank analyst Daniel Briesemann said in a note. read more

Spot silver was down 1.2% at $25.42 per ounce, platinum fell 0.4% to $983.00, while palladium rose 1.4% to $2,347.29.

REUTERS