Early on Friday, gold prices are on the decline as a result of a strengthening in US Treasury yields, but are still on track to post the best performance seen in five weeks due to a weakness in the US dollar and increased expectations for additional fiscal stimulus rollout. At the time of writing, GOLD is trading at a little above $1,862.

So far this week, spot gold has gained 2.2% after hitting a high of over $1,874 in the previous session. However, US Treasury yields were on the uptick on Thursday, as markets anticipated a rise in inflation even as they considered the possibility of fresh debt supply as a result of increased spending by the Biden administration.

While the prospect of more stimulus measures in the US continues to support the safe haven appeal of gold, it shares a negative correlation with US Treasury yields. Higher treasury yields make gold more expensive to hold, denting weakening its appeal and sending investors away from purchasing the precious metal.

Gold also enjoys support from a continued weakness in the US dollar, which fell to the lowest level seen in over a week on Thursday. A weaker dollar makes it more affordable for holders of other currencies to invest in bullion, helping limit its losses even when it trades bearish.