NEW YORK: Gold prices gave up gains of 1% on Monday as a stronger dollar and increased risk appetite among investors eclipsed support from a retreat in US Treasury yields. Spot gold was down 0.6% at $1,723.30 an ounce by 02:02 p.m. ET (1902 GMT) and US gold futures settled 0.3% down at $1,723.

“Vision of economic recovery, the dollar rebounding off recent lows, equity markets doing well ... in this environment there’s been a bit of a lesser demand for gold,” said David Meger, director of metals trading at High Ridge Futures.

“But on the other side of that coin, we are seeing an additional $1.9 trillion stimulus being injected into the economy and we could potentially see an inflationary environment down the road, in which gold has a tendency to fare quite well.”

The dollar index jumped to a three-week high, while optimism over the economic stimulus and promising updates on COVID-19 vaccines lifted risk sentiment in wider financial markets.

The US House of Representatives approved President Joe Biden’s $1.9 trillion coronavirus relief bill early on Saturday, sending it to the Senate for consideration.

Although gold may be supported by the stimulus in the medium term, gold will face some “headwinds”, said StoneX analyst Rhona O’Connell. While gold is considered a hedge against inflation, recent higher bond yields have threatened that status because they translate into a higher opportunity cost of holding bullion, which pays no return.

Offering some respite to gold, benchmark 10-year US Treasury yields eased from a one-year high.

On the technical front, the psychological $1,700 level is very significant, while the $1,760-$1,765 range is an important hurdle for gold to rise further, said Stephen Innes, chief global market strategist at financial services firm Axi. In other precious metals, silver slipped 0.5% to $26.50 an ounce, palladium climbed 1.6% to $2,354.40 and platinum was steady at $1,188.30.