Gold eased on Tuesday in choppy trading that had earlier seen it climb as much as 1%, as a firm dollar and rising U.S. Treasury yields outweighed support from bets on higher inflation as Washington rolls out more stimulus.
Spot gold was 0.1% lower at $1,842.21 per ounce at 10:07 a.m. EST (1507 GMT). On Monday, prices touched their lowest level since Dec. 2. U.S. gold futures were down 0.5% at $1,841.80.
“We’ve still got COVID-19 raging and offsetting that is the vaccine rollout and looking out, in the spring time maybe the worst will be past,” said Kitco Metals senior analyst Jim Wyckoff, adding a further rebound in the dollar index and rising yields remain a near term negative for gold.
The dollar index rebounded from a near three-year low reached last week, when benchmark 10-year U.S. Treasury yields breached 1% for the first time since March.
Gold is generally considered a hedge against the inflation and currency debasement that can result from widespread stimulus. However, higher bond yields have challenged that status recently as they increase the opportunity cost of holding non-yielding bullion.
“There’s going to be a big stimulus package that should be supportive for the gold market, it can not only stimulate demand but also prompt ideas of some problematic price inflation,” Wyckoff added.
U.S. President-elect Joe Biden said Americans needed more economic relief from the COVID-19 pandemic and that he would deliver a plan costing “trillions” of dollars.
While gold was still vulnerable in the short term to gains in the dollar and yields, “the macro picture is still positive for gold,” said Nicholas Frappell, global general manager at ABC Bullion.
Silver gained 1.6% to $25.31 an ounce. Platinum climbed 3% to $1,063.17, while palladium was up 0.9% at $2,393.52.