Gold inches up as dollar and yields weaken

Bengaluru — Gold edged higher on Monday, hovering near a seven-week peak hit in the previous session, as a weaker dollar and lower US Treasury yields supported prices.

Spot gold was up 0.1% at $1,777.65 per ounce by 6.50am, after hitting its highest since February 25 at $1,783.55 on Friday.

US gold futures edged 0.1% lower to $1,777.80 per ounce.

A combination of a weaker US dollar and easing interest rates is “supportive for gold, despite [a] better economic outlook”, said Michael McCarthy, chief market strategist at CMC Markets.

“We’ve got the momentum. But of course we are at a very important point having just got through that $1,765 level. While we hold above the $1,765 level, the outlook for gold is positive in the short term.”

The dollar index was languishing near a one-month low against its rivals, making gold less expensive for other currency holders. Benchmark US 10-year Treasury yields edged lower towards multiweeks low touched last week.

Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Sentiment in equities remained upbeat as Asian shares hovered near 1½-week highs on expectations that monetary policy will remain accommodative the world over. The US Federal Reserve has reiterated its stance to keep monetary policy accommodative until the crisis is over, while Fed officials have said that any spike in inflation is likely to be temporary.

“Inflation expectations are holding above 2.5% amid soaring commodities prices. This along with the Fed’s dovish stance on the monetary policy, is keeping the backdrop supportive for bullion,” ANZ analysts said in a note.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures.

Elsewhere, silver fell 0.6% to $25.79 per ounce after hitting a near one-month high in the last session.

Palladium rose 0.2% to $2,782.68, while platinum gained 0.1% to $1,204.12.