By Brijesh Patel
(Reuters) - Gold fell nearly 2% on Tuesday to a two week trough as hopes of progress in peace talks between Russia and Ukraine coupled with the likelihood of a U.S. interest rake hike dented demand for the safe-haven asset.
Spot gold fell 1.35 % to $1,924.81 per ounce by 12:24 p.m. ET (1624 GMT), after earlier touching its lowest since March 1 at $1,913.10.
U.S. gold futures fell 1.7% to $1,927.10.
"There's a lesser need for safe havens at the moment given peace talks in Ukraine, the upcoming Federal Reserve rate hike and some pullback in commodity prices across the board," said David Meger, director of metals trading at High Ridge Futures.
Talks between Russia and Ukraine, discussing a ceasefire and a withdrawal of Russian troops from Ukraine are ongoing, one of Ukraine's negotiators said.
The Fed is expected to raise interest rate by 25 basis points on Wednesday to fight soaring inflation.
The prospect of the first U.S. rate hike in three years lifted U.S. 10-year treasury yields to multi-month highs. Higher interest rates increase the opportunity cost of holding non-yielding bullion.
"The first rate hike move from the U.S. quite often signals a low point in gold, so we'll see what kind of signal they send tomorrow, and how hawkish their statement is, which will probably determine the short-term outlook from here," said Saxo Bank analyst Ole Hansen.
Spot palladium XPD= was up 2.3% at $2,442.16 per ounce, after its weakest session in two years on Monday, as supply fears receded.
The rising COVID-19 cases in China could also lower demand for the autocatalyst metal amid fresh lockdowns, said Bart Melek, head of commodity strategies at TD Securities.
"It's a two-prong impact here-on the supply side, there's less risk, while on the demand side, potentially less demand."
Silver fell 0.6% to $24.87, while platinum XPT= slipped 3.3% to $996.32.