Gold Inches Lower as Rising Yields, Stronger Dollar Weigh

Jan 8 Reuters Gold eased on Friday as the U.S. dollar and Treasury yields firmed, although hopes for additional stimulus in the worlds largest economy kept bullion on course for a second straight weekly gain.

Spot gold was down 0.1 to 1,910.96 per ounce by 0719 GMT, but was up 0.7 so far this week. U.S. gold futures shed 0.3 to 1,908.30.

In the short term, we just seem to lack a catalyst to drive prices higher, said IG Market analyst Kyle Rodda.

The effect of fiscal stimulus hopes has driven up inflation expectations, but were starting to see nominal bond yields climb as well, which is reasonably significant for gold.

The benchmark 10year bond yield scaled a fresh high since March, holding above 1, and helping the dollar rebound strongly.

A stronger dollar makes bullion more expensive for holders of other currencies, while higher bond yields increase the opportunity cost of holding the noninterest yielding gold.

Democrats control of the U.S. Senate has fuelled hopes of large stimulus measures and boosted inflation expectations, underpinning golds appeal as an inflationaryhedge.

But higher inflation expectations and bond yields have also bolstered Federal Reserve officials hopes that the central banks new monetary policy approach is taking hold.

Gold still harbours the potential to reclaim the 2,000 handle. But there appears to be a risk of a pullback in the Feds asset purchasing programme should a U.S. economic outperformance crystallize in the latter part of…

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