PRECIOUS-Gold regains some ground as U.S. dollar, yields take breather

BY Reuters | TREASURY | 09/27/22 06:11 AM EDT

*

Dollar off two-decade peak hit on Monday

*

SPDR Gold Trust holdings at lowest since March 2020

*

Fed's Evans sees interest rates at 4.25-4.5% by year end

(Adds details and updates prices)

By Brijesh Patel

Sept 27 (Reuters) - Gold bounced off a 2-1/2-year low on Tuesday as a slight pullback in the dollar and U.S. Treasury yields helped alleviate some pressure from expectations for aggressive U.S. rate hikes.

Spot gold was up 1.1% at $1,638.60 per ounce as of 1130 GMT, after falling to its lowest since April 2020 at $1,620.20 in the previous session.

U.S. gold futures climbed 0.8% to $1,646.50.

"After an explosive start on Monday, U.S. yields and the dollar are slightly paring gains, which is helping to ease the downward pressure on gold prices," said Craig Erlam, senior market analyst at OANDA.

"The yellow metal remains incredibly sensitive to both and we're seeing a lot of volatility right now as markets increasingly price in much higher rates."

The dollar index eased off a two-decade peak scaled in the previous session, making gold less expensive for other currency holders.

The benchmark 10-year Treasury yield also retreated from a 12-year peak, reducing the opportunity cost of holding non-interest bearing gold.

The Federal Reserve has aggressively raised interest rates since March and has signalled more increases are to come, stoking concerns of a global recession and triggering a sell-off in the equity markets.

The U.S. central bank will need to raise rates by at least another percentage point this year, Chicago Fed President Charles Evans said on Tuesday.

Gold, traditionally seen as a safe-haven asset, has failed to benefit from the recent rout in equities as investors flocked to the safety of the U.S. currency amid hawkish stance on rates by the Fed.

"Its (gold's) status as a haven asset in times of economic distress has failed to stem the flow of selling," analysts at ANZ said in a note.

Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, have fallen to their lowest since March 2020.

Elsewhere, spot silver gained 1.9% to $18.69 per ounce, platinum rose 0.9% to $859.98, while palladium climbed 0.8% to $2,061.73. (Reporting by Brijesh Patel in Bengaluru; editing by Uttaresh.V and Vinay Dwivedi)

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