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PRECIOUS-Gold eases on higher Treasury yields, rebounding dollar

· 02/07/2021 22:48
PRECIOUS-Gold eases on higher Treasury yields, rebounding dollar

Adds comments, details, updates prices

10-year Treasury yields firm

Investors await progress on U.S. COVID-19 relief package

By Sumita Layek

- Gold prices inched lower on Monday, as Treasury yields moved higher and the dollar bounced up, although concerns over a recovery in the U.S. economy limited bullion's losses.

Spot gold XAU= fell 0.1% to $1,810.65 per ounce by 0319 GMT. U.S. gold futures GCv1 eased 0.1% to $1,811.10.

Benchmark 10-year Treasury yields US10YT=RR were hovering near their highest since March last year hit in the previous session, increasing the opportunity cost of holding non-yielding bullion. US/

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 .DXY attempted a rebound after falling from an over two-month peak on Friday. A stronger dollar makes gold expensive for holders of other currencies. USD/

Concerns of a slow recovery in the United States after a weaker-than-expected U.S. jobs report limited gold's decline. nL1N2KA34D

Weaker non-farm payrolls have raised economic uncertainty as well as high expectations for more fiscal stimulus from the U.S., 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. nL1N2KA2P3

Breakevens on 10-year Treasury Inflation-Protected Securities US10YTIP=RR, which measure average annual inflation expectations for the coming decade, have jumped to 2.19%, the highest level since mid-2018. nL1N2KA2P3

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. nL1N2KD0M6

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

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

(Reporting by Sumita Layek in Bengaluru; Editing by Krishna Chandra Eluri)

((Sumita.Layek@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 8061822693; Reuters Messaging: Sumita.Layek.thomsonreuters.com@reuters.net))