Spot gold was down 1.2 per cent at $1,773.72 per ounce by 02:16 p.m. EST (1916 GMT), having hit its lowest since Nov. 30 at $1,768.60 earlier.
US gold futures settled down 1.5 per cent at $1,772.80. "The US economy is expected to slowly recover," said David Meger, director of metals trading at High Ridge Futures.
Optimism over gaining the upper hand over the coronavirus is being shown in a slightly firmer dollar and in the 10-year yields, which rose to their highest since February 2020, Meger added.
Growing optimism for a $1.9 trillion US stimulus plan and rising inflation expectations pushed up benchmark Treasury yields, which in turn lifted the dollar to a more than one-week peak.
Breakeven inflation, a measure of expected inflation, is at its highest since August 2014 at 2.2 per cent.
While gold is considered an inflation hedge likely spurred by widespread stimulus, higher yields have challenged that status since they increase the opportunity cost of holding non-yielding gold.
But gold could come back into favour once other currencies start to outperform the dollar later this year, said OANDA analyst Craig Erlam.
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