European Markets

Gold slips as yields edge up on Fed rate hike prospects

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  • Dollar index at two-month low
  • U.S. weekly jobless claims hit eight-week high
  • Wall St pressured by Big Tech declines

Jan 14 (Reuters) - Gold prices retreated on Thursday, as U.S. Treasury yields edged up with the Federal Reserve likely to raise interest rates in March.

Spot gold fell 0.3% to $1,820.71 per ounce by 14:17 ET (1917 GMT). U.S. gold futures settled down 0.3% at $1,821.4.

Expectations around a Fed interest rate hike lifted U.S. Treasury yields higher, potentially increasing the opportunity cost of holding non-yielding gold.

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Meanwhile, the number of Americans filing new claims for unemployment benefits increased to an eight-week high in the first week of January. read more

Ed Moya, a senior market analyst at brokerage OANDA, said the overall gold market reaction to the data was rather muted since it did not change the narrative of what the Fed is likely to do in March. Higher interest rates tend to dim appeal of gold, which pays no interest.

Equity traders are nervous about the Fed tightening its monetary policy. The PPI data being mostly below expectations and a bump in jobless claims supported the idea that it could possibly make the Fed pump the brakes on its "hawkish rhetoric," Moya added.

Sentiment towards riskier assets remained subdued as Wall Street's main indexes fell due to declines in megacap growth stocks, while a slower rise in producer prices in December spurred hopes that inflation has potentially reached its peak.

"Gold's performance is in a way slightly disappointing, bearing in mind the pretty seismic collapse in the U.S. dollar," said Ross Norman, an independent analyst.

The U.S. dollar index , which tracks the greenback against six major currencies, fell 0.3% to a two-month low.

Among other precious metals, spot silver was unchanged at $23.11 an ounce, while platinum was down 0.5% to $972.49, and palladium fell 0.8% to $1,895.17.

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Reporting by Kavya Guduru in Bengaluru; Editing by Shailesh Kuber and Vinay Dwivedi

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