Gold Drops as Dollar, US Treasury Yields Hold Firm

Gold prices slipped $20 on Friday, trading at $1829 per ounce as the US dollar and Treasury yields held firm.

"Gold's upside looks constrained amid rising yield and buoyant risky assets. A weaker US Dollar, stimulus and depressed interest rates should remain supportive to gold prices," said Australasian bank ANZ in a report.

After President-Elect Joe Biden speech, announcing a stimulus plan worth $1.9 trillion, commodity prices dropped, and long-term US borrowing costs slipped from 10-month high. Biden promised taxpayers a gift of $1,400 in new Economic Impact Payments to offset the coronavirus pandemic repercussions.

Reports say that 2021 is likely to add to gold as consumer demand that has been largely weak amid the pandemic may pick up on the back of the economic recovery in 2021.

It is suspected that gold consumption may continue to improve, given the positive correlation between economic growth and Chinese demand for gold.

Likewise, the Indian gold market appears to be in a stronger position, as data from the Dhanteras Festival, India's single biggest buying gold season, indicates that as gold demand remains below average, it has recovered significantly from lows in the second quarter of last year.

Also, gold prices show a strongly negative average correlation of minus 0.65 across the last half-decade – back down at minus 0.99%.