By Asha Sistla
(Reuters) - Gold eased on Tuesday as the U.S. dollar held firm on rising prospects of more sanctions against Russia and possibly bigger interest rate hikes by the Federal Reserve to rein in inflation.
Spot gold was down 0.2% at $1,928.52 per ounce by 0457 GMT. U.S. gold futures were down 0.1% at $1,931.70.
"The more liquid something is, the less the volatility. And, if markets are running away from risk... the dollar then becomes a natural haven just because it is quite simply the most liquid financial instrument in existence," said Ilya Spivak, a currency strategist at DailyFX.
"Now in real terms, those yields are still negative once we discount break evens. And I think that's why gold hasn't fallen more significantly, but if this sort of repricing for a more hawkish Fed continues and we do get positive real rates, I think gold is going to look quite unattractive."
The dollar index was little changed after three straight sessions of gains as talks of further sanctions against Moscow increased. A stronger dollar makes gold less attractive for other currency holders.[USD/]
The United States and Europe were planning new sanctions to punish Moscow over civilian killings in Ukraine, and President Volodymyr Zelenskiy warned more deaths were likely to be uncovered in areas seized from Russian invaders.
U.S. two-year Treasury yields climbed to their highest level since early-2019 and 10-year yields ticked higher on Monday. Higher yields increase the opportunity cost of holding non-paying bullion. [US/]
"During these uncertain times, gold remains supported as a critical portfolio hedge that will shine during the most challenging juncture when inflationary pressures remain strong but growth slows," Stephen Innes, managing partner at SPI Asset Management, said in a note.
Spot silver shed 0.2% to $24.45 per ounce, platinum fell 0.5% to $981.88 and palladium rose 0.5% to $2,286.63.