PRECIOUS-Gold near 2-month peak on soft dollar, U.S. verdict in focus

  • Reuters
  • Commodities News
PRECIOUS-Gold near 2-month peak on soft dollar, U.S. verdict in focus

(Recasts, adds comment, updates prices)

* U.S. 10-year yields hit highest since March

* Gold can reach $2,000 by end of month - analyst

* Minutes of U.S. Fed's last policy meeting due at 1900 GMT

By Sumita Layek

Jan 6 (Reuters) - Gold held near its highest in nearly two months on Wednesday, supported by a softer dollar as investors awaited a verdict from the U.S. Senate run-off election in Georgia.

Spot gold XAU= rose 0.1% to $1,951.31 per ounce by 0835 GMT, having hit a nearly two-month peak of $1,954.97 earlier in the session. U.S. gold futures GCv1 eased 0.1% to $1,952.80.

"The market is very reactive to the polls and liquidity is pretty thin. (But) It will hoover up dips in gold regardless of who wins because the general view right now is reflation trade," said Axi chief global market strategist Stephen Innes.

Gold could still reach $2,000 by the month-end, Innes added.

The U.S. dollar slipped as Democrats took the lead in runoff votes that will determine control of the U.S. Senate and possibly pave the way for a big spending administration under President-elect Joe Biden. USD/

Bullion tends to gain from widespread stimulus measures since investors consider it a hedge against possible inflation that could result from the stimulus.

A weaker dollar also makes dollar-denominated commodities cheaper for other currency holders.

Capping gold's gains, U.S. 10-year Treasury yields US10YT=RR hit their highest since March. US/

Higher bond yields increase the opportunity cost of holding non-interest bearing gold.

"We continue to be positive on gold. The macro backdrop that supported gold last year extends into this year and key drivers such as portfolio diversification into gold should have room to extend this year, so that should continue to support prices," UBS strategist Joni Teves said.

Investors will seek further guidance from minutes of the U.S. Federal Reserve's Dec. 15-16 policy meeting, due at 1900 GMT.

The Fed might decide to unleash more monetary stimulus once it has a clearer picture of the make-up of the U.S. Congress, said Howie Lee, an economist at OCBC Bank.

Silver XAG= shed 0.1% to $27.55 an ounce. Platinum XPT= fell 0.8% to $1,102.48, while palladium XPD= rose 0.1% at $2,469.18.

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