PRECIOUS-Gold slips as interest rate expectations sap appeal

BY Reuters | ECONOMIC | 07/04/22 05:50 AM EDT
       * Another 75 bps rate increase not fully priced in -analyst
    * Silver price near its lowest in two years

 (Updates prices)
    By Arundhati Sarkar
    July 4 (Reuters) - Gold fell on Monday as prospects of
higher interest rates dimmed appeal for the non-yielding asset,
but a softer dollar helped bullion to cling above the $1,800
support level.
    Spot gold        fell 0.2% to $1,807.40 an ounce by 1311
GMT, having touched a five-month low of $1,783.50 on Friday.
    U.S. gold futures        rose 0.4% to $1,809.00.
    The U.S. dollar was down 0.2% but held close to a two-decade
high reached last month.
    A weaker dollar makes gold less expensive for those holding
other currencies.
    "Gold bulls are stuck in a quagmire of aggressive Fed policy
actions, as the prospects of higher U.S. rates erode support for
the precious metal," said Han Tan, chief market analyst at
Exinity.
    The U.S. Federal Reserve is expected to deliver another 75
basis point (bps) interest rate increase this month.

    The European Central Bank, too, is widely expected to follow
its global peers. Euro zone inflation hit yet another record
high in June as price pressures broadened.
    "Markets have yet to fully price in a 75 bps hike at this
month's FOMC meeting. If policymakers are forced to turn more
aggressive in the face of unwavering inflation, that could spell
another leg down for gold prices," Tan said.
    Investors are also awaiting publication of minutes from last
month's Fed meeting on Wednesday and U.S. employment data on
Friday.
    "In this environment of ever-rising interest rates, it is
hard to see gold making significant gains. But if the precious
metal can hold above $1,800 an ounce, then it would demonstrate
that there remains significant underlying support," said Rupert
Rowling, market analyst at Kinesis Money.
    Spot silver        fell 0.3% to $19.81 an ounce, trading
near its lowest in two years.
    Spot platinum        was down 0.7% at $882.75, while
palladium        fell by 1.1% to $1,939.83.
    U.S. markets are closed for the Independence Day holiday.



 (Reporting by Arundhati Sarkar in Bengaluru
Editing by Jacqueline Wong and David Goodman
)

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.

fir_news_article