PRECIOUS-Gold holds near one-week high after U.S. inflation data

BY Reuters | TREASURY | 01/12/22 08:44 PM EST

Jan 13 (Reuters) - Gold prices on Thursday held near a one-week high hit in the previous session, as the U.S. dollar and Treasury yields retreated after inflation data came in line with expectations and reiterated the need for a quicker interest rate hike.

FUNDAMENTALS

* Spot gold was flat at $1,824.55 per ounce by 0109 GMT. U.S. gold futures were down 0.2% to $1,824.00.

* The consumer price index increased 0.5% last month, just above the 0.4% expectation, the Labor Department said on Wednesday. The CPI surged 7.0% in 2021, the biggest year-on-year increase since June 1982 but in line with the forecast of economists polled by Reuters.

* Following the inflation reading, the dollar fell to a two-month low, making gold more attractive for overseas investors.

* U.S. benchmark 10-year yields also slipped, moving away from two-year highs hit earlier in the week. Lower yields reduce the opportunity cost of holding non-interest bearing gold.

* Investors and analysts now expect the U.S. central bank's policy-setting Federal Open Market Committee (FOMC) to raise its benchmark overnight interest rate from the current near-zero level at its March meeting, and continue with three more quarter-percentage-point increases over the year.

* Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates which increase the opportunity cost of holding non-yielding bullion.

* Zimbabwe's gold production rose by 55.5% in 2021, central bank data showed on Wednesday, as government moves to incentivise miners bore fruit.

* Spot silver was up 0.1% at $23.14 an ounce, platinum climbed 0.1% to $978.09, and palladium shed 0.2% to $1,906.48.

DATA/EVENTS (GMT) 1330 US Initial Jobless Clm Weekly (Reporting by Asha Sistla in Bengaluru; editing by Uttaresh.V)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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