PRECIOUS-Gold eases as yields gain on Fed rate hike bets

BY Reuters | ECONOMIC | 01/16/22 08:07 PM EST

Jan 17 (Reuters) - Gold prices eased on Monday, as U.S. Treasury yields gained on hawkish signals from the Federal Reserve and markets began to price in a sooner-than-anticipated reduction in balance sheet.


* Spot gold was down 0.2% to $1,814.08 per ounce by 0024 GMT. U.S. gold futures edged down 0.1% at $1,815.00.

* U.S. 10-year Treasury yields hovered near two-year highs hit in the previous week.

* Fed Chair Jerome Powell said last week that the U.S. economy is ready for the start of tighter monetary policy, while other Fed officials also signalled that the Fed is getting ready to start raising interest rates in March.

* 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.

* Bank of Japan policymakers are debating how soon they can start telegraphing an eventual interest rate hike in a meeting this week.

* Data out of China due on Monday are expected to show retail sales and industrial output slowed further in December.

* Physical gold buying faltered in India last week, as prices climbed and rising coronavirus cases prompted consumers to postpone purchases, while demand in top consumer China stabilised as Lunar New Year festivities approached.

* Spot silver shed 0.3% to $22.89 an ounce, platinum was down 0.3% to $967.33, and palladium fell 0.4% to $1,871.50.

DATA/EVENTS (GMT) 0200 China Urban Investment (YTD) YY Dec 0200 China Industrial Output YY Dec 0200 China Retail Sales YY Dec 0200 China GDP YY Q4 1400 Meeting of EU finance ministers in Brussels World Economic Forum holds annual meeting (to Jan 22) Bank of Japan holds Monetary Policy Meeting (to Jan. 18) (Reporting by Asha Sistla in Bengaluru; Editing by Rashmi Aich)

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.

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