Gold Inches Lower As Rising Yields, Stronger Dollar Weigh

Gold eased on Friday as the U.S. dollar and Treasury yields firmed, although hopes for additional stimulus in the world’s largest economy kept bullion on course for a second straight weekly gain.

Spot gold was down 0.1% to $1,910.96 per ounce by 0719 GMT, but was up 0.7% so far this week. U.S. gold futures shed 0.3% to $1,908.30.

“In the short term, we just seem to lack a catalyst to drive prices higher,” said IG Market analyst Kyle Rodda.

“The effect of (fiscal stimulus hopes) has driven up inflation expectations, (but) we’re starting to see nominal bond yields climb as well, which is reasonably significant for gold.”

The benchmark 10-year bond yield scaled a fresh high since March, holding above 1%, and helping the dollar rebound strongly.

A stronger dollar makes bullion more expensive for holders of other currencies, while higher bond yields increase the opportunity cost of holding the non-interest yielding gold.

Democrats’ control of the U.S. Senate has fuelled hopes of large stimulus measures and boosted inflation expectations, underpinning gold’s appeal as an inflationary-hedge.

But higher inflation expectations and bond yields have also bolstered Federal Reserve officials’ hopes that the central bank’s new monetary policy approach is taking hold.

“Gold still harbours the potential to reclaim the $2,000 handle. (But) there appears to be a risk of a pullback in the Fed’s asset purchasing programme should a U.S. economic outperformance crystallize in the latter part of the year,” said FXTM market analyst Han Tan.

“Another massive yields spike may then trigger further unwinding of gold’s recent gains.”

Investors now await U.S. non-farm payrolls data due later in the day to gauge the jobs market’s health.

Silver fell 0.2% to $27.06 an ounce. Platinum climbed 0.8% to $1,124.98, while palladium gained 0.5% to $2,430.95.

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