Gold Extends Biggest Loss in Two Months on Rising Dollar, Yields

Photographer: Chris Ratcliffe / Bloomberg

Gold fell to extend the biggest drop in two months amid gains in the dollar, Treasury yields and equities as investors weighed in on President-elect Joe Biden’s pledge to detail plans for huge US economic aid .

Bullion suffered a week of reversal in early January as early gains were canceled out as a surge in T-bill yields dampened the appeal of the unpaid asset. It comes as the dollar has recovered from its lowest level in nearly three years. The S&P 500 broke another record on Friday.

Gold recorded the biggest annual gain in a decade last year, as the pandemic tore the global economy apart and central banks and governments spurred stimulus. With the vaccine rollout, traders are weighing the safe-haven outlook for 2021, weighing factors including the outlook for further massive support, changes in inflation expectations and risk appetite.

Biden on Friday called for billions of dollars in immediate additional aid, including an increase in out-of-pocket payments, after a surge in coronavirus cases drove the U.S. payroll down for the first time since April. He will set out his proposals on Thursday, before taking office on January 20.

Rising yields “are casting cold water on gold right now,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. prevailing. Gold could be trending sideways for now, but higher inflation expectations would likely cause gold to rise later in the year.

Spot gold fell 1.7% to $ 1,817.49 an ounce, the lowest level since Dec. 2, before cutting losses to trade at $ 1,836.76 at 10:57 a.m. in Singapore. The price fell 3.4% on Friday, the most since November 9. Silver, platinum and palladium all fell as the Bloomberg Dollar Spot Index rose 0.4%.

Meanwhile, in American politics, the House will pass a resolution this week to to impeach Donald Trump for his actions encouraging the crowds that stormed the Capitol, President Nancy Pelosi said. At the same time, the president plans a provocative last week in office, according to people familiar with the matter.