PRECIOUS-Gold retreats on strong dollar, fading hopes of big US rate cut

BY Reuters | ECONOMIC | 10/07/24 10:18 AM EDT

*

US CPI, PPI data due later this week

*

Dollar trading at its highest level in seven weeks

*

Traders see an 86% chance of a 25-bp Fed rate cut in Nov

*

China central bank pauses gold purchases for 5th month in Sept

(Recasts copy as of 1355 GMT)

By Anushree Mukherjee

Oct 7 (Reuters) - Gold prices eased on Monday as the U.S. dollar held strong and recent employment data prompted investors to scale back expectations of a big rate cut from the Federal Reserve in November.

Spot gold fell 0.3% to $2,645.00 per ounce by 09:55 a.m. ET (1355 GMT), off a record peak of $2,685.42 hit on Sept. 26.

U.S. gold futures eased 0.1% to $2,664.70.

The U.S. dollar hovered at its highest level in seven weeks, making greenback-priced bullion more expensive for other currency holders.

"The dollar strength is the short-term headwind at this point that's preventing new all time highs for gold," said Peter A. Grant, vice president and senior metals strategist at Zaner Metals.

"I still see short term potential to $2,700 and the longer-term objective at $3,000 remains valid due to safe haven demand from geopolitical tensions and political uncertainty as we get closer to the U.S. election."

Bullion is considered a hedge against geopolitical and economic uncertainties and tends to thrive in a low interest rate environment.

Traders now see an 86% probability that the Fed will cut rates by only a quarter of a percentage point next month after a U.S. employment report last week reinforced the belief the economy is unlikely to need the Fed to deliver large interest rate cuts for the rest of this year.

The market will now scan through minutes of the Fed's last policy meeting, and the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data this week.

Elsewhere, China's central bank held back on buying gold for its reserves for a fifth straight month in September.

With gold prices near record highs, China may hold back on further accumulation in the short-term but the broader trend to load up on the metal could continue, IG market strategist Yeap Jun Rong said.

Spot silver fell 1.3% to $31.75 and platinum lost 0.8% to $980.55, while palladium rose 0.8% to $1,020.25. (Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru)

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