PRECIOUS-Gold dips as U.S. bond yields edge up, dollar firms

BY Reuters | TREASURY | 01/14/22 11:01 AM EST

(Recasts, updates prices)

* Gold on track for best week since mid-November

* U.S. retail sales down 1.9% in December

By Kavya Guduru

Jan 14 (Reuters) - Gold prices slipped on Friday, weighed down by an uptick in Treasury yields on prospects of U.S. interest rate hikes and a stronger dollar, although bullion was on course for its best week since mid-November.

Spot gold was down 0.3% at $1,817.46 per ounce by 12:34 p.m. ET (1734 GMT). U.S. gold futures fell 0.2% to $1,816.90.

Benchmark U.S. 10-year Treasury yields firmed, while the dollar rose 0.4% against its rivals, making bullion costlier for overseas buyers.

Gold gained briefly after the release of data showing retail sales tumbled by 1.9% in December as Americans struggled with shortages of goods due to supply chain bottlenecks and an explosion of COVID-19 infections.

Gold is acting a placeholder in people's portfolios "until the dust settles" in terms of where the economy is going, said Philip Streible, chief market strategist at Blue Line Futures in Chicago.

The weak data this week could eventually either cause a selloff in wider markets or prompt the Federal Reserve to curb rate hike expectations, and gold gets a tailwind either way, Streible added.

However, overall declines in the dollar this week put bullion on track for a weekly gain of about 1.2%, its biggest percentage rise in nine weeks.

Gold is considered a hedge against surging inflation, but interest rate hikes translate into higher opportunity cost of holding non-yielding bullion.

"Considering that markets will ultimately remain intensely focused on the Fed's exit, fewer sources of upside flow in the coming weeks could leave gold prices vulnerable to a consolidation", TD Securities said in a note.

Spot silver fell 0.8% to $22.89 an ounce, and was en route to post a 2.6% weekly gain.

Platinum was unchanged at $969.50 and was set to gain about 1.5% this week, while palladium fell 0.8% to $1,872.20 and poised for a weekly drop of nearly 3%. (Reporting by Kavya Guduru in Bengaluru; Editing by Amy Caren Daniel and Shailesh Kuber)

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.