PRECIOUS-Gold flat as dollar strength counters weaker U.S. bond yields

BY Reuters | TREASURY | 05/18/22 09:10 PM EDT
       May 19 (Reuters) - Gold prices were flat on Thursday, as an
elevated dollar weighed on greenback-priced bullion and
countered support from lower Treasury yields, with the metal's
outlook already dulled by an aggressive Federal Reserve stance
on inflation.

    FUNDAMENTALS
    * Spot gold        held its ground at $1,816.63 per ounce at
0047 GMT. U.S. gold futures        edged 0.1% lower to
$1,814.10.
    * The U.S. dollar        rose on Wednesday, snapping a
three-session losing streak, as concerns about the outlook for
global economic growth and rapid inflation knocked sentiment a
day after Fed Chair Jerome Powell struck a more hawkish tone.

    * A stronger dollar makes gold less attractive for buyers
holding other currencies.
    * U.S. Treasury yields fell on Wednesday, tracking losses on
Wall Street, after poor U.S. housing data added to growing
slowdown concerns amid aggressive monetary tightening by the
Fed, buoying demand for zero-yield gold.
    * Two U.S. central bankers say they expect the Fed to
downshift to a more measured pace of policy tightening after
July as it seeks to quell inflation without lifting borrowing
costs so high that they send the economy into recession.

    * 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.
    * British inflation surged last month to its highest annual
rate since 1982, pressuring finance minister Rishi Sunak to
offer more help for households and the Bank of England to keep
raising interest rates despite a risk of recession.
    * Spot silver        fell 0.2% to $21.35 per ounce, platinum
       dropped 0.8% to $927.77, and palladium        slipped 1%
to $1,996.92.

    DATA/EVENTS (GMT)
    0130   Australia   Unemployment Rate          April
    1230   US          Initial Jobless Clm        Weekly
    1230   US          Philly Fed Business Indx   May
    1400   US          Existing Home Sales        April


 (Reporting by Bharat Govind Gautam in Bengaluru; Editing by
Sherry Jacob-Phillips)

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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