Gold edges up as dollar and Treasury yields ease

Gold bounced off a 2-1/2-month low as the US dollar and Treasury yields eased on Thursday, though analysts said optimism over economic recovery left bullion vulnerable to further corrections.

Spot gold rose 0.7% to $1,788.16 an ounce by 1308 GMT, having touched its lowest since Nov. 30 at $1,768.60 on Wednesday. US gold futures advanced 0.6% to $1,783.20.

"The dollar's slight declines have offered some respite for gold, said FXTM market analyst Han Tan. "It's only natural that gold would take a breather, after posting five consecutive days of losses."

The dollar retreated, bolstering gold's appeal to other currency holders.

Benchmark 10-year Treasury yields pulled back after hitting their highest since the end of February 2020 on Wednesday, reducing the opportunity cost of holding non-yielding bullion.

Also supporting gold, the US Federal Reserve on Wednesday reiterated its pledge to keep interest rates near zero until inflation and employment pick up.

However, gold is having a tough time trying to win over investors as an inflation hedge, with other assets favoured instead, FXTM's Tan said.

Optimism over an economic recovery was bolstered by strong US retail sales data on Wednesday.

On the technical front, a dip in gold's 50-day moving average below the 200-day moving average could lead to more selling, analysts said.

"Previously people would snap up gold as an inflation hedge, (but) we are now seeing people pour money into Bitcoin," said David Madden, analyst at CMC Markets UK, noting that Bitcoin's rally could have contributed to gold's recent declines.

Autocatalyst metal platinum also advanced 1.5% to $1,271.94 an ounce.

"As long as data such as auto sales and production continues to be positive, that will help the message that platinum should be one of the winners from the industrial cycle strengthening," said independent analyst Robin Bhar.

Elsewhere, palladium rose 0.4% to $2,380.53 and silver lost 0.2% to $27.29.