Gold steadies near 2-week high on dollar retreat

Gold prices hovered near a two-week high on Thursday as the dollar slipped, with investors awaiting the passage of US President Joe Biden's proposed $1.9 trillion dollar stimulus package.

Spot gold was little changed at $1,871.10 per ounce by 1002 GMT, after hitting its highest since Jan. 8 at $1,874.86 earlier in the day. Bullion had gained 1.7% on Wednesday.

US gold futures rose 0.2% to $1,869.60.

"Basically what we've got at the moment is (gold) still consolidating. The tailwinds are the economic stimulus in the States and weakening of the dollar," said StoneX analyst Rhona O'Connell.

O'Connell added that it remained to be seen whether the stimulus would go through both houses of Congress as quickly as Biden's expectations and "that's probably one of the reasons why gold hasn't been going huge".

Biden's top priority remains the $1.9 trillion stimulus plan to revive a pandemic-hit economy, but it will require approval from a divided Congress, where Democrats hold slim advantages in both the House and Senate.

Gold is considered a hedge against inflation that can result from stimulus measures.

However, higher yields have challenged that status recently as they increase the opportunity cost of holding non-yielding bullion.

The dollar slipped to a near one-week low and benchmark 10-year US Treasury yields remained steady after Biden's inauguration and following a speech by his nominee for Treasury Secretary Janet Yellen.

However, with all the stimulus talk bound to boost inflation expectations, "in that scenario, the Federal Reserve will look to hold back on policy support and probably start thinking about unwinding current policy measures, which will boost the dollar and undermine the value of gold," said DailyFX currency strategist Ilya Spivak.

Silver was up 0.3% to $25.88 an ounce. Platinum gained 0.9% to $1,119.92, while palladium rose 0.5% to $2,384.15.