Gold Edges Higher as US Treasury Yields Retreat From One-Year High

Gold is gaining strength in early trading amid a decline in US Treasury yields even as the possibility of more fiscal stimulus being rolled out in the US supports its safe haven appeal. At the time of writing, GOLD is trading at a little above $1,720.

After rising to the highest levels seen in a year, the benchmark 10-year US Treasury yields eased lower in the previous session following comments from Fed officials dismissing worries about high inflation. The possibility of reinflation had sparked fears in global financial markets, which had sent government bond yields higher, increasing the opportunity cost of holding non-yielding gold and denting its appeal among investors.

Gold also finds support from progress in the finalizing of President Joe Biden’s proposal for an additional $1.9 trillion worth of fiscal stimulus measures. After the stimulus bill was passed by the House, the Senate is set to debate the relief bill in the coming days.

Higher stimulus measures to boost recovery weaken market confidence in the US economy and dollar, and make gold more attractive as an investment. However, recent optimistic data about the state of the US manufacturing sector is keeping lids on the precious metal’s gains for now.