Gold fell to extend the biggest drop in two months amid gains in the dollar, Treasury yields, and equities, with investors weighing President-elect Joe Biden’s pledge to detail plans for huge US economic aid.
Bullion endured a switchback week as January got under way, with early gains getting overturned as a surge in Treasury yields damped the appeal of the non-interest bearing asset. That’s come as the dollar recovered from its lowest level in almost three years.
The S&P 500 hit another record on Friday.
Gold posted the biggest annual gain in a decade last year as the pandemic ripped through the global economy, and central banks and governments boosted stimulus.
With vaccines getting rolled out, traders are weighing up the haven’s prospects over 2021, assessing drivers including the outlook for further massive support, shifts in inflation expectations, and appetite for risk.
Biden on Friday called for trillions of dollars in immediate further aid, including increased direct payments, after a surge in coronavirus cases caused US payrolls to drop for the first time since April.
He will lay out his proposals on Thursday, before taking office on Jan. 20.
The rise in yields is “pouring cold water on gold at the moment,” said Howie Lee, an economist at Oversea-Chinese Banking Corp.
“Rising inflation expectations and higher yields are pulling gold in different directions right now and the latter seems to be prevailing. Gold may trend sideways for now but rising inflation expectations would likely drive gold higher later in the year.”
Spot gold dropped as much as 1.7% to $1,817.49 an ounce, the lowest level since Dec. 2, before paring losses to trade at $1,836.76 at 10:57 a.m. in Singapore.
The price sank 3.4% on Friday, the most since Nov. 9. Silver, platinum and palladium all fell as the Bloomberg Dollar Spot Index rose 0.4%.
Meanwhile, in US politics, the House this week will take up a resolution to impeach Donald Trump over his actions encouraging the mob that stormed the Capitol, Speaker Nancy Pelosi said.
At the same time, the president plans a defiant final week in office, according to people familiar with the matter.