Gold Rises as Dollar Weakens But Rising Treasury Yields Limit Gains
Arslan Butt • 1 min read
Gold prices are on the rise in early trading on Monday despite an improvement in the overall market sentiment, being driven higher by a weakness in the US dollar; however, gains remain limited by strong US Treasury yields. At the time of writing, GOLD is trading at a little above $1,793.
The precious metal is making gains as the US dollar dips against other major currencies as traders turn more optimistic about global economic recovery as more countries roll out the COVID-19 vaccines. Gold shares a negative correlation with the reserve currency, as a weaker dollar makes it more affordable for holders of other currencies to purchase the safe haven metal.
On the other hand, the benchmark 10-year US Treasury yields soared to the highest levels seen in almost one year, exerting downward pressure on the yellow metal. Higher treasury yields increase the opportunity cost of holding non-yielding bullion, weakening its appeal among investors.
The precious metal is also enjoying support from a rise in demand across India – the world’s second largest consumer of physical gold. Last week, the demand soared after gold prices across India fell to the lowest levels seen since June 2020.