Gold gains on lower yields, U.S. stimulus hopes

Gold prices firmed on Tuesday as U.S. Treasury yields eased and the metal`s appeal as an inflation hedge was boosted by expectations that a large U.S. stimulus would be passed eventually.

Spot gold rose 0.3% to $1,859.68 per ounce by 0329 GMT. U.S. gold futures gained 0.2% to $1,859.10.

U.S. Senate Majority Leader Chuck Schumer told MSNBC that Democrats may try to pass much of President Joe Biden`s $1.9 trillion coronavirus relief bill using a procedural manoeuvre to bypass a Republican filibuster.

"If we get the stimulus, gold can break through $1,900," said Stephen Innes, chief global market strategist at financial services firm Axi."The quicker the package gets delivered, the more favourable it`s for gold. Whether it`s a smoother process or not, the market doesn`t care."

Further supporting gold, U.S. 10-year Treasury yields hovered near a three-week low touched in the previous session.

Investors are focused on the U.S. Federal Reserve`s two-day policy meeting, which is scheduled to begin later in the day.

"The Fed`s cognizant that the world economy is still struggling and that`ll have a negative knock-on effect on the domestic market ... so, it will indicate low Fed funds rates for quite a long time and push back on tapering," Innes said.

Easy monetary policy adds pressure on government bond yields and benefits non-yielding gold.

Despite expectations that the Fed will stand pat on monetary policy, investors will keep a close watch on its tone.

"If the Fed signals that they`re not looking to expand stimulus, and puts the seeds out there that they might have to consider exiting sooner than they currently think... that could be very detrimental for gold," said DailyFX currency strategist Ilya Spivak.

Silver rose 0.3% to $25.37 an ounce, platinum lost 0.6% to $1,092.15, and palladium fell 0.2% to $2,329.62.

(Reporting by Sumita Layek in Bengaluru; Editing by Subhranshu Sahu)

The story has been taken from a news agency