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 was up 0.1% at $1,813.96 per ounce by 0552 GMT. U.S. gold futures 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 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.
However, limiting gold’s advance was benchmark 10-year Treasury yields at their highest since March last year. Higher yields increase the opportunity cost of holding non-yielding bullion.
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.
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.
Breakevens on 10-year Treasury Inflation-Protected Securities, which measure average annual inflation expectations for the coming decade, have jumped to 2.19%, the highest level since mid-2018.
Gold is considered a hedge against inflation and currency debasement, likely from widespread stimulus.
Among other precious metals, spot silver gained 0.6% to $26.99 an ounce, platinum rose 0.9% to $1,133.75 and palladium added 0.3% to $2,343.59.