LONDON: Gold prices eased on Thursday as a surge in US Treasury yields and firm dollar dampened demand for bullion, although losses were limited by hopes for more fiscal stimulus after Democrats won control of the US Senate.

Spot gold was down 0.2% to $1,915.21 per ounce by 1223 GMT. US gold futures were up 0.5% to $1,918.30.

Prices slipped as much as 2.5% after scaling a high since Nov. 9 on Wednesday, as 10-year US Treasury yields jumped above 1% for the first time since March.

“I see this as a consolidation after a very strong start to the year. The market has caught a bit of a cold because of the (bond yields) rally and they are rallying for the reasons that we’re actually seeing gold continue to be supported, so it’s a bit of a catch 22 right now,” said Saxo Bank analyst Ole Hansen.

“The US economy is nowhere near any level where we can start to talk about a full recovery and that will require additional stimulus or spending which will potentially drive yields higher, but it will also drive inflation expectations higher.”

A Democrat victory in the US Senate runoffs fuelled inflation expectations as investors hoped for more fiscal stimulus, while the US Congress certified President-elect Joe Biden’s win.

Bullion is seen as a hedge against inflation and currency debasement that could result from large stimulus measures.

The dollar index rebounded from a multi-year low as yields gained over 1%. A stronger dollar makes gold expensive for holders of other currencies.

“The dollar is going to depreciate all through 2021, US yields may move slightly higher from here, but they’re not going to run away to the top, in that environment gold should flourish,” said Jeffrey Halley, a senior market analyst at OANDA.

Silver fell 0.8% to $27.09 an ounce. Platinum was down 0.6% to $1,094.85, and palladium slipped 1.1% to $2,411.36.