Gold eases as Treasury yields and dollar firm

Bengaluru — Gold prices inched lower on Monday, as Treasury yields moved higher and the dollar bounced up, though concerns over a recovery in the US economy limited bullion’s losses.

Spot gold fell 0.1% to $1,810.65 per ounce by 5.19am. US gold futures eased 0.1% to $1,811.10. Benchmark 10-year Treasury yields were hovering near their highest since March last year hit in the previous session, increasing the opportunity cost of holding non-yielding bullion.

Yields are “probably the biggest single headwind” for gold, Nicholas Frappell, global general manager at ABC Bullion said, adding gold remains vulnerable to the dollar, which has more room to extend its recent gains.

The dollar attempted a rebound after falling from an over two-month peak on Friday. A stronger dollar makes gold expensive for holders of other currencies. Concerns of a slow recovery in the US after a weaker-than-expected US jobs report limited gold’s decline.

Weaker non-farm payrolls have raised economic uncertainty as well as high expectations for more fiscal stimulus from the US, said Howie Lee, an economist at OCBC Bank.

Gold can rise to $1,900 levels later in 2021 as Treasury yields are capped at some stage and focus shifts to inflation expectations, Lee said. Break-evens on 10-year Treasury Inflation-Protected Securities, which measure average annual inflation expectations for the coming decade, have jumped to 2.19%, the highest level since mid-2018.

Investors’ focus now remains on the progress of the $1.9-trillion Covid-19 relief package, which House Speaker Nancy Pelosi believes will pass before March 15 with or without bipartisan support.

Gold is considered a hedge against inflation and currency debasement, likely from widespread stimulus.

Among other precious metals, spot silver gained 0.4% to $26.94 an ounce, platinum rose 0.7% to $1,131.50 and palladium added 0.4% to $2,346.