Gold firms as softer US dollar, yields lift appeal

[BENGALURU] Gold edged higher on Monday, hovering near a seven-week peak hit in the previous session, as a weaker dollar and lower US Treasury yields supported prices.

Spot gold was up 0.1 per cent at US$1,777.33 per ounce by 2.38am GMT, after hitting its highest since Feb 25 at US$1,783.55 on Friday. US gold futures edged 0.2 per cent lower to US$1,777.

"At the moment, the combination of a weaker US dollar and easing interest rates is supportive for gold, despite better economic outlook," said Michael McCarthy, chief market strategist at CMC Markets.

"We've got the momentum. But of course we are at a very important point having just got through that US$1,765 level. While we hold above the US$1,765 level, the outlook for gold is positive in the short term."

The dollar index was languishing near a one-month low against its rivals, making gold less expensive for other currency holders.

Benchmark US 10-year Treasury yields edged lower towards multi-weeks low touched last week. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Sentiment in equities remained upbeat as Asian shares hovered near 1-1/2-week highs on expectations that monetary policy will remain accommodative the world over.

US Federal Reserve has reiterated its stance to keep monetary policy accommodative until the crisis is over, while Fed officials have said that any spike in inflation is likely to be temporary.

"With rates volatility falling like a stone as the Fed pricing is off the boil and the dollar looking posed to weaken further, gold has been back in demand from both paper and physical markets," Stephen Innes, chief global market strategist at financial services firm Axi, said in a note.

Elsewhere, silver fell 0.6 per cent to US$25.81 per ounce after hitting a near one-month high in the last session. Palladium eased 0.3 per cent to US$2,766.91, while platinum was steady at US$1,203.61.

REUTERS