Gold retreats on elevated US yields, strong dollar

Gold prices retreated on Monday, halting a rebound from a nine-month low touched last week, as the dollar firmed, while US treasury yields remained elevated, denting bullion's appeal.

Spot gold was down 0.6% to $1,691.27 per ounce at 1141 GMT, after hitting its lowest since June 8 at $1,686.40 on Friday. US gold futures declined 0.7% to $1,686.10.

The dollar climbed to a three-month peak, while US 10-year Treasury yields held close to a more than one-year high, increasing the opportunity cost of holding gold, which pays no interest.

While gold is being kept in check by the high yields and the dollar, "we see gold behaving like a tsunami, the water is going away at the moment due to severe pressure, but prices will come back with even more strength once these factors are gone", said Commerzbank analyst Daniel Briesemann.

Helping gold recoup some of its losses earlier during the Asian session, the US Senate passed President Joe Biden's $1.9 trillion COVID-19 relief plan.

"Inflation is definitely going to go up" because of rising oil and base metal prices, and some of the individual US stimulus money may also go into investments such as gold exchange-traded funds to hedge against future inflation, said DailyFX strategist Margaret Yang.

Gold also saw some support earlier in the day, following an attack on Saudi Arabia's oil industry on Sunday.

While gold is considered a hedge against inflation likely stemming from widespread stimulus, higher bond yields this year have threatened that status because they translate into a higher opportunity cost of holding bullion.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to a 10-month low on Friday.

Silver rose 0.4% to $25.28 an ounce. Palladium shed 0.2% to $2,332.90, while platinum rose 1.2% to $1,143.51.