Gold rally cools as bond yields, stocks recover; palladium rises

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  • Wall Street rises as Powell says rate hikes on track
  • SPDR gold holdings at eight-month high
  • Platinum up more than 1%

March 2 (Reuters) - Gold slipped on Wednesday due to an uptick in risk appetite and U.S. bond yields, while concerns over a supply crunch that may follow sanctions on Russia kept the price of auto-catalyst metal palladium near a seven-month peak.

Spot gold was down 1.1% at $1,921.56 per ounce by 02:01 p.m. EST (1901 GMT).

U.S. gold futures settled 1.1% lower at $1,922.30.

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"We're seeing a more of a technically motivated pullback as there is a bit of a lesser need for safe havens. We've seen equity markets stabilize," said David Meger, director of metals trading at High Ridge Futures.

Wall Street gained and benchmark U.S. 10-year Treasury yields edged higher after Federal Reserve Chair Jerome Powell signalled interest rate hikes could start this month despite uncertainties surrounding the conflict in Ukraine. read more

Although gold is considered a safe investment during such uncertainty, it is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding bullion.

Analysts also said gold's moves may have been led by a large sell order, driving a roughly $20 drop around 5:27 a.m. EST (1027 GMT), but it was not clear who or what prompted the move.

Meanwhile, Commerzbank analyst Daniel Briesemann noted that gold prices could go up despite a U.S. rate hike in March as "everything is dependent on how the Russia-Ukraine conflict develops."

Palladium , used by automakers in catalytic converters to curb emissions, was up 3.5% at $2,670.89, having hit its highest level since July at $2,722.79 on Tuesday.

"Given the supply constraints that we are concerned about due to the Russian sanctions, it is obvious that we would see platinum and palladium prices rise," High Ridge Futures' Meger added.

Western nations have ratcheted up sanctions on Russia, which accounts for 40% of global palladium production, including shutting out some Russian banks from the SWIFT global financial network. read more

Spot silver fell 0.9% to $25.14, while platinum rose 1.7% to $1,070.74.

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Reporting by Brijesh Patel in Bengaluru Editing by Paul Simao

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