Gold flat as weaker US yields balance firmer dollar

Gold held steady on Monday above the key level of $1,800 per ounce, as its enhanced appeal due to slightly weaker US Treasury yields was countered by an uptick in the dollar, making bullion more expensive for holders of other currencies.

Spot gold was flat at $1,807.90 per ounce by 0815 GMT, staying mostly ahead of $1,800 since closing above that level last week.

US gold futures were down 0.1 per cent at $1,809.40.

Benchmark US Treasury yields edged down from the previous session's more than one-week high, reducing the opportunity cost of holding bullion, which pays no interest.

The dollar index inched up from its weakest level in nearly a week, making greenback-priced gold less attractive for holders of non-U.S. currencies. "Gold faces resistance just above $1,815 and if the recent past is any indication, gold will continue to struggle to hold onto gains at these levels unless the US dollar moves sharply lower this week," said Jeffrey Halley, a senior market analyst at OANDA.

Asian stock markets were generally weaker with US crude in holiday-thinned trading, as uncertainty over the economic impact of the Omicron variant weighed on investor sentiment.

"What's happening with inflation and the US Federal Reserve's response to it is really the main catalyst that makes for a challenge to finding directional momentum," said DailyFX currency strategist Ilya Spivak.

However, although quiet overall this week, "the low liquidity makes headline sensitivity more pronounced, as the thin markets are likely to make for more jittery price action if something were to happen," Spivak added.

Japanese shares fell on Monday, as concerns over the Omicron Covid-19 variant's impact offset gains in heavyweight technology stocks.

Spot silver dropped 0.8 per cent to $22.75 an ounce, and platinum fell 1.9 per cent to $956.11.

Palladium was down 0.4 per cent at $1,941.38 an ounce, after hitting its highest since November 23 at $1,962.50 earlier in the session.