Gold prices decline as US yields remain firm

Gulf Today Report 

Gold dropped on Wednesday as hope for US Treasury yields increasing on further economic stimulus kept non-yielding bullion under pressure.

Spot gold eased 0.2% to $1,734.26 per ounce by 03:20 GMT while US gold futures dipped 0.1% to $1,732.

Kyle Rodda, IG Market analyst said "there's a clear trend for gold to the downside, and as long as fiscal stimulus keeps getting pumped into the US economy and the Federal Reserve remains reticent about doing something to quash yields, gold prices will struggle."

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Benchmark US Treasury yields have maintained close to 1.4% levels despite the decline it recorded in the previous week.

Although gold serves as a shield against inflation, the increase in yields is affecting gold’s status.

Prices can receive a reprieve if "the Fed comes out and says that it'll control yields or we get an outbreak in inflation expectations that implies that it's going to move out of the Fed's control," Rodda said, adding that until then it's "the worst of all worlds for gold."

Analysts say higher yields can force the Fed to tighten monetary conditions sooner than anticipated, which is negative for gold.