Gold Falls as Bond Yields Rise And Pressure From a Rising Dollar

Gold fell on Friday, January 8th, as the dollar and US Treasury yields rose, but hopes for additional stimulus in the world’s largest economy kept the yellow metal on track for gains for the second week in a row.

Spot gold fell 0.3% to 1,907.66 dollars but it has risen 0.5% since the beginning of this week. US gold futures fell 0.3% to $1,908.80.

The yield on the benchmark ten-year bonds hit a new record high since March, consolidating above 1% and helping the dollar recover strongly.

A higher dollar increases the cost of gold to holders of other currencies, while higher bond yields increase the opportunity cost of owning a precious metal that does not yield a return.

The Democratic control of the US Senate fueled hopes for major stimulus measures and boosted inflation expectations, which supports the appeal of gold as a tool to hedge against inflation.

But rising inflation expectations and bond yields also reinforce Fed officials’ hopes that the Fed’s new monetary policy approach is taking hold.

Investors are now awaiting the US non-farm payrolls report due to be released later today to gauge the resilience of the job market.

As for the other precious metals, silver fell 0.5% to $26.98 an ounce. Platinum fell 0.2% to $1114.11 an ounce, while palladium fell 0.1% to $ 2,417.45.