Gold edge higher following decline in U.S. dollar and Treasury yield

Gold Price Decline Pauses On Political Unrest In Washington, Stimulus Bets

The nominal yield on benchmark 10-year United States debt is up more than 20 basis points to 1.1187% this year, helping the dollar to rise to a one-month high of 104.20 against the Japanese yen.

The precious metal has lost ground so far in 2021 after posting its biggest annual gain in a decade on the back of the devastating effects of the pandemic, vast stimulus, and rising haven demand.

The pullback in yields pushed the dollar below 104 Japanese yen to trade at 103.95 yen, up 0.2%.

Commercial property prices fell almost 10% in 2020, according to the Green Street Commercial Property Price Index, although the hardest hit sectors saw declines of 15% to 25%.

That has also prompted some investors to trim their bearish bets versus the dollar with net short bets on the dollar versus the euro declining to $21 billion, compared with $24 billion two weeks earlier, according to latest positioning data.

"We continue to think the greenback's downtrend should remain intact as long as global recovery prospects stay intact", said Mark Haefele, chief investment officer at UBS Global Wealth Management.

The dollar index fell more than 0.2% to 90.30 points, after opening at 90.51 points, with an intraday high of 90.61 points.

From a technical perspective, the dollar moves present a bit of a challenge for dollar buyers after the recent push higher. US gold futures gained 0.5% to $1,860.

Higher bond yields increase the opportunity cost of holding the non-interest yielding gold.

Investors expect that result to usher in huge sums in government borrowing to fund big-spending stimulus plans and have figured that higher US rates might make the dollar more attractive.

Investors also took note of Federal Reserve (Fed) vice-chair Richard Clarida's comments on Friday that the United States economy was headed for an "impressive" year, helped by coronavirus vaccines and potential for larger government spending.

Gold futures on MCX (Multi Commodity Exchange of India) opened slightly higher at Rs 49,320 per 10 grams after closing with marginal gains at Rs 49,300 on Monday at 11.55 pm, post the announcement on impeachment.

Gold prices benefit from a loose monetary policy. Fed Chair Jerome Powell is due to speak on Thursday.

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