PRECIOUS-Gold eases off nine-month peak as U.S. dollar, yields gain

BY Reuters | ECONOMIC | 01/24/23 10:42 AM EST

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Holdings in iShares Silver Trust rose 4% on Monday

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U.S. 10-Treasury yields at near one-week peak

(Recasts, adds comments, updates prices)

By Seher Dareen

Jan 24 (Reuters) - Gold prices pulled back from a nine-month high on Tuesday due to a slight uptick in the dollar and U.S. bond yields, although hopes of slower interest rate hikes from the Federal Reserve underpinned the market.

Spot gold fell 0.2% to $1,927.35 per ounce by 10:20 a.m. ET (1520 GMT), after hitting its highest since late-April 2022 earlier in the session. U.S. gold futures was up 0.3% to $1,922.30.

The dollar index gained 0.2% against its rivals, making greenback-priced bullion cheaper for many buyers, while benchmark U.S. 10-Treasury yields rose to a near one-week high.

A survey from S&P Global showed price pressures ticking higher for the first time since last spring, indicating that inflation is far from licked despite aggressive measures to contain it by the Fed.

"I think gold is still holding quite strong as the market expectations are turning more towards a pause from the Fed potentially, or a turn to a more dovish policy," said Ryan McKay, commodity strategist at TD Securities.

The U.S. central bank delivered four consecutive rate hikes of 75 basis points (bps) before slowing its pace to 50 bps last month to fight soaring inflation.

Traders are now pricing in a 96% chance the Fed will raise rates by 25 bps at its policy meeting next week.

"As the expectation of inflation continuing to come down, there will be lesser need for Fed interest rate hikes and the market is really focused on the idea of an ending to the Fed interest rate cycle," said David Meger, director of metals trading at High Ridge Futures.

Although gold is considered a hedge against economic uncertainties, higher rates tend to dull zero-yielding bullion's appeal.

Elsewhere, spot silver rose 0.1% to $23.47 per ounce. Holdings in New York's iShares Silver Trust exchange-traded fund increased by 4% on Monday.

Platinum gained 0.6% to $1,052.75 and palladium jumped 1.2% to $1,725.13. (Reporting by Seher Dareen in Bengaluru; Editing by Krishna Chandra Eluri)

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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