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Jan 8, 2021

Gold sags on yields, U.S. dollar; silver tumbles most since September

A one-ounce Britannia gold coin sits on one hundred gram gold bars at Gold Investments Ltd. bullion dealers in this arranged photograph in London, U.K., on Wednesday, July 29, 2020. Gold held its ground after a record-setting rally as investors awaited the outcome of a Federal Reserve meeting amid expectations policy makers will remain dovish, potentially spurring more gains. Photographer: Chris Ratcliffe/Bloomberg

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Gold dropped below US$1,900 an ounce as technical selling took over after an earlier recovery in the dollar and Treasury yields sent prices tumbling. Silver tumbled the most since September.

Gold fell as much as 4.5 per cent in New York, the most since November, erasing gains made at the start of this year. Silver slid as much as 9.8 per cent. The dollar erased losses amid higher U.S. 10-year Treasury yields, which are raising the prospect of a pause in the currency’s recent slide. Gold’s initial drop was exacerbated after prices breached the 100-day moving average, a key technical level.

Precious metals have swung sharply since the start of the new year as higher benchmark Treasury yields and growing expectations of economic support pressured prices, while a raging pandemic, uncertainty on a global economic recovery and expectations of rising inflation remain tailwinds for the metal.

“It is the first week of January and the staying power for positions tends to be low so moves can get exaggerated,” Tom Fitzpatrick, a Citigroup Inc. technical strategist, said in an emailed message. The range between roughly US$1,849 and US$1,855 is a key area to watch, given the move lower is similar to a pattern in November when yields and the dollar also pressured gold, he said.

The two Democratic wins in Georgia’s Senate runoffs this week give U.S. President-elect Joe Biden full control of Congress, allowing him to push through more stimulus and higher spending on economic reconstruction.

Spot gold dropped 4.1 per cent to US$1,835.70 an ounce by 1:32 p.m. in New York. The metal is set to post its first weekly decline in six weeks. Silver slid 9.3 per cent to US$24.6272 an ounce after falling as much as 9.8 per cent, the most since Sept. 21. Platinum and palladium also fell.

The Bloomberg Dollar Spot Index gained 0.3 per cent.