PRECIOUS-Gold firms as softer dollar negates pressure from higher yields

BY Reuters | ECONOMIC | 05/17/22 09:22 PM EDT
       May 18 (Reuters) - Gold prices edged higher on Wednesday, as
a weakening dollar countered pressure from stronger Treasury
yields and an aggressive stance on inflation by the U.S. Federal
Reserve chief.
    A weaker dollar makes gold more attractive for buyers
holding other currencies.

    * Spot gold        was up 0.1% at $1,816.56 per ounce, by
0106 GMT. U.S. gold futures        dipped 0.2% to $1,814.50.
    * The dollar        extended its decline to a fourth day,
pulling back from a recent two-decade high against a basket of
major peers, as an uptick in investors' appetite for riskier
bets diminished the U.S. currency's appeal.
    * However, yields on the benchmark U.S. 10-year Treasury
note steadied after a sharp rise in the previous session,
capping demand for zero-yield gold.
    * Fed Chair Jerome Powell on Tuesday pledged that the U.S.
central bank would ratchet interest rates as high as needed to
kill a surge in inflation that he said threatened the foundation
of the economy.
    * The Fed has raised its benchmark policy rate by
three-quarters of a percentage point this year, and is on track
to increase it again in half-percentage-point increments at its
next two meetings in June and July.
    * Although seen as an inflation hedge, bullion is sensitive
to rising U.S. short-term interest rates and bond yields, which
raise the opportunity cost of holding it.
    * U.S. retail sales increased solidly in April as consumers
bought motor vehicles amid an improvement in supply and
frequented restaurants, showing no signs of demand letting up
despite high inflation.
    * Spot silver        rose 0.2% to $21.66 per ounce, platinum
       gained 0.1% to $952.31, and palladium        advanced
0.2% to $2,057.35.

    0130   Australia   Wage Price Index       Q1
    0600   UK          CPI  YY                Apr
    0900   EU          HICP Final             Apr
    1230   US          Housing Starts Number  Apr

 (Reporting by Bharat Govind Gautam in Bengaluru; Editing by
Subhranshu Sahu)

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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