PRECIOUS-Gold slides to fresh 2-1/2-year low as U.S. dollar, yields climb

BY Reuters | ECONOMIC | 09/28/22 05:12 AM EDT

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Silver falls to three-week low

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Dollar hits fresh two-decade high

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U.S. 10-year bond yields at highest since 2008

(Updates prices)

By Brijesh Patel

Sept 28 (Reuters) - Gold prices dropped to a fresh 2-1/2-year low on Wednesday, as a rally in the U.S. dollar and Treasury yields on prospects of more aggressive rate hikes by the Federal Reserve diminished its appeal.

Spot gold was down 0.1% at $1,626.79 per ounce, as of 0854 GMT, after falling to its lowest since April 2020 at $1,613.60 earlier in the session.

U.S. gold futures slipped 0.1% to $1,635.10.

"The main factor really is the strength of the dollar, which has been supported by the ongoing Fed narrative that they will do whatever it takes to bring down the inflation," said Ricardo Evangelista, senior analyst at ActivTrades.

"I see gold prices staying subdued for the foreseeable future. We are coming close to a support around the $1,600 level. It would probably stay in a narrow range around just above that level despite the ongoing geopolitical instability."

Rival safe-haven dollar scaled a new two-decade high, hurting demand for greenback-priced gold among buyers holding other currencies, as rising global interest rates fuel recession worries in the financial markets.

Gold has failed to benefit from the recent rout in equities as higher interest rates increase the opportunity cost of holding non-yielding bullion.

Also weighing on gold, benchmark U.S. 10-year Treasury yields rose to their highest level since October 2008.

Chicago Fed President Charles Evans, St. Louis Fed President James Bullard and Minneapolis Fed Bank President Neel Kashkari echoed the U.S. central bank's pledge to focus on tackling soaring inflation.

Meanwhile, silver fell 1.2% to $18.21 per ounce after hitting a three-week low of $17.94 earlier in the session.

"While the metal (silver) may continue to drift lower in the short-term, any dip below $18 an ounce is likely to spark buying activity to see it quickly regain that threshold," Kinesis Money analyst Rupert Rowling wrote in a note.

Platinum fell 0.9% to $840.03 after touching its lowest since Sept. 5, while palladium shed 0.7% to $2,073.03. (Reporting by Brijesh Patel in Bengaluru; editing by Jason Neely 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.

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