PRECIOUS-Gold stares at steepest quarterly drop in 1-1/2 yrs on higher rates

BY Reuters | ECONOMIC | 09/30/22 05:01 AM EDT

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Gold down 7.8% for the quarter

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Silver, platinum set for second-straight quarterly decline

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Current gains in gold are likely to be limited-analyst

(Adds comment, updates prices)

By Arundhati Sarkar

Sept 30 (Reuters) - Gold prices, which gained on Friday as the dollar weakened, were on course for their worst quarter since March last year as central banks worldwide stick with aggressive monetary policies.

Spot gold rose 0.3% to $1,665.99 per ounce by 1029 GMT and has gained 1.4% so far this week. For the quarter it is down 7.8%, the most since the first quarter of 2021.

U.S. gold futures added 0.4% to $1,674.50.

The dollar index traded near a one-week low, making gold less expensive for buyers holding other currencies.

"Gold is drawing strength from a weaker dollar and easing Treasury yields as the week slowly comes to an end," FXTM analyst Lukman Otunuga said.

"However, given how the key fundamental drivers weighing heavily on gold remain intact, the current gains are likely to be limited. In the meantime, prices are seen testing the $1,680 level in the short term," Otunuga added.

Fed policymakers have been resolute in raising interest rates despite a turmoil in global financial markets.

Although gold is considered a safe bet in times of uncertainty, rate hikes tend to dull the appeal of bullion, which yields no interest.

Once it becomes clear how much the Fed will tighten its policy, "gold could bottom and start to recover," said Carlo Alberto De Casa, external analyst for Kinesis Money.

Meanwhile, Britain's economy unexpectedly grew in the second quarter but still stayed below its pre-pandemic peak, contrary to an earlier estimate that it had recovered.

"As we move towards let's say October, November, the physical demand from India, China is going to be supportive," said Ajay Kedia, director at Kedia Commodities in Mumbai.

Spot silver rose 1.1% to $19.0167 per ounce, while platinum was little changed at $865.11. Both metals were headed for their second straight quarterly decline.

Palladium, which was flat at $2,201.47 per ounce, has gained about 14% so far this quarter. (Reporting by Arundhati Sarkar and Eileen Soreng 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.

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