SPY380.36-1.97 -0.52%
DIA309.45-4.53 -1.44%
IXIC13,192.35+72.96 0.56%

PRECIOUS-Gold rises on weaker dollar, U.S. stimulus hopes

· 02/07/2021 22:48
PRECIOUS-Gold rises on weaker dollar, U.S. stimulus hopes

Recasts, updates prices

10-year Treasury yields hit highest since March

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

Interactive graphic tracking global spread of coronavirus: https://tmsnrt.rs/3mvcUoa

By Sumita Layek

- Gold prices edged higher on Monday, as softer U.S. jobs data cemented hopes of further fiscal stimulus and pressured the dollar, although bullion's gains were capped by higher Treasury yields.

Spot gold XAU= was up 0.1% at $1,813.96 per ounce by 0552 GMT. U.S. gold futures GCv1 rose 0.1% to $1,815.50.

"Markets are justifiably spooked by the very low non-farm payrolls on Friday and that has raised economic uncertainty as well as high expectations for more fiscal stimulus from the U.S., gold has responded to that," said Howie Lee, an economist at OCBC Bank.

The dollar .DXY fell from an over two-month peak on Friday after a weaker U.S. jobs data stoked concerns of a slow recovery in the United States. USD/ nL1N2KA34D

However, limiting gold's advance was benchmark 10-year Treasury yields US10YT=RR at their highest since March last year. Higher yields increase 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.

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 can rise to $1,900 levels later in 2021 as Treasury yields are capped at some stage and focus shifts to inflation expectations, OCBC's 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

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

Among other precious metals, spot silver XAG= gained 0.6% to $26.99 an ounce, platinum XPT= rose 0.9% to $1,133.75 and palladium XPD= added 0.3% to $2,343.59.

(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))