Gold hits near six-week low on firmer dollar, higher Treasury yields

Andrew Cummings
January 12, 2021

Apart from the charges on Trump, global investors also have an eye on the increase in the number of COVID-19 infections that has surpassed 90.37 million.

The Dow Jones Industrial Average fell 62.98 points, or 0.2%, to 31,034.99, the S&P 500 lost 21.92 points, or 0.57%, to 3,802.76 and the Nasdaq Composite dropped 146.83 points, or 1.11%, to 13,055.15.

In the worldwide market, Spot Gold was steady at $1,845.19 per ounce as Asian stocks traded lower (ahead of Indian market's opening), dragged by political unrest in Washington and rising global COVID-19 cases, outweighing a firmer dollar and US Treasury yields.

Asian stocks mostly traded lower as Democrats in the U.S. House of Representatives barrelled towards impeaching U.S. President Donald Trump in the wake of Capitol siege last week.

The pan-European STOXX 600 index fell 0.3%.

Longer-term Treasury yields were at their highest since March, after weak jobs on Friday fueled speculation about more U.S. fiscal stimulus now that Democrats are in control of the government.

Expectations of a multitrillion-dollar stimulus plan and the belief the Federal Reserve will not act to counter rising interest rates, along with new Treasury supply are helping yields rise, said Gennadiy Goldberg, an interest rate strategist at TD Securities in NY.

Meanwhile, the US 10-year Treasury yield firmed above 1 percent bolstered by expectations of more USA fiscal stimulus, helping the dollar scale a near three-week peak.

The spread between the 2-year and 10-year Treasury yield brushed against 100 basis points to hit its steepest since July 2017.

The climb in yields in turn offered some support to the down-trodden dollar, which had edged up to 90.439 against a basket of currencies from last week's low of 89.206. Multi Commodity Exchange (MCX) gold futures, due for a February 5 delivery, were last seen trading lower by 4.1 per cent - at Rs 48,818, having swung between Rs 48,818 and Rs 50,799 during the session compared to their previous close of Rs 50,904.

"It is hardly surprising that the recent acceleration in real United States yields has reminded the FX markets to end its focus on inflation and to assume a more comprehensive approach in its dollar valuation", Commerzbank strategists said.

The dollar index rose 0.256%, with the euro down 0.54% to US$1.2152.

Crude oil prices fell, hit by renewed concerns about global fuel demand amid tough coronavirus lockdowns across the globe, as well as the stronger dollar.

Platinum fell 2.7 per cent to US$1,036.14, while palladium shed 0.6 per cent to US$2,355.16.

Spot gold was little changed at $1,845.19 per ounce by 0037 GMT, after touching its lowest since December 2 in the previous session.

Brent futures fell 1.3% to $ 55.25.

Bitcoin last fell 17.49% to $31,498.43.

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