Gold on back foot as firm US dollar weighs

Gold prices inched lower on Monday as the US dollar and global share markets firmed on the back of improving economic outlook, with elevated bond yields putting further pressure on the metal.

Spot gold was down 0.1% to $1,730.48 per ounce by 0340 GMT. US gold futures were also down 0.1%, at $1,728.10 per ounce. "Yields are the big threat to gold in the near term," said Michael McCarthy, chief market strategist at CMC Markets, adding: "if the sell-off in bonds gathers momentum, gold could fall below $1,700 'very quickly'."

US Treasury yields held close to one-year highs reached on March 18, while the dollar began the week firmly as US economic strength and a vaccine rollout proceeding much more quickly than in Europe, drew investors into the greenback.

A stronger dollar makes greenback-denominated gold expensive for holders of other currencies. Further weighing on gold, Asian shares inched higher as the chance of yet more trillion in US fiscal spending underpinned the global growth outlook.

Market participants are now waiting for US President Joe Biden's infrastructure spending package on Wednesday, which is speculated to be in the $3 trillion to $4 trillion range.

"Gold seems to be caught between inflation expectations and higher interest rates... the lack of movement in gold is reflecting that indecision in the market at the moment, and consequently there's very little action," McCarthy said.

Speculators raised their bullish positions in COMEX gold and cut them in silver contracts in the week to March 23, the US Commodity Futures Trading Commission said on Friday. Among other metals, silver fell 0.7% to $24.87 per ounce, palladium was down 0.2% to $2,669.98 and platinum shed 0.4% to $1,180.36.