PRECIOUS-Gold rises, yields retreat after softer US jobs data

BY Reuters | ECONOMIC | 06/05/24 11:13 AM EDT

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Benchmark U.S. Treasury yields drop to two-month low

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US payrolls data due on Friday

(Rewrites as of 1449 GMT)

By Rahul Paswan

June 5 (Reuters) - Gold prices gained on Wednesday as bond yields fell after weaker-than-expected U.S. private payrolls data bolstered expectations that the Federal Reserve would cut interest rates later this year.

Spot gold was up 0.8% at $2,346.99 per ounce, as of 1449 GMT, after a 1% fall in the previous session. U.S. gold futures rose 0.8% to $2,367.20.

Benchmark U.S. Treasury yields fell to their lowest since April 5 after data showed U.S. private payrolls increased less than expected in May. A weak labour number adds fuel to the fire that the Fed may have to cut rates before year end, boosting gold's appeal, said Bob Haberkorn, senior market strategist at RJO Futures. Lower interest rates decrease the opportunity cost of holding non-yielding gold.

According to the CME FedWatch Tool, traders now see about a 67% chance of a Fed rate cut by September, versus below 50% last week.

Other key U.S. economic reports, including the ISM services data due at 1400 GMT and the non-farm payrolls report scheduled for Friday, will have the potential to influence gold prices, analysts said.

"An upside print in the NFP could see the expected timeline for the first rate cut shift back in favour of November, while a downside miss could see September firm as the favoured month for potential action from the Fed," Tim Waterer, chief market analyst at KCM Trade, said in a note.

On the physical front, net purchases of gold by global central banks rose to 33 metric tons in April from a revised net buying of 3 tons in March, the World Gold Council (WGC) said, signalling the sector's continuing strong appetite for the metal despite high prices.

Among other precious metals, spot silver rose 0.7% $29.68 per ounce, platinum was up 0.4% at $991.00 and palladium gained 2.1% to $934.50.

(Reporting by Rahul Paswan in Bengaluru; Editing by Ravi Prakash Kumar)

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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