NEW YORK: Gold prices firmed above the key psychological threshold of $1,800 on Tuesday, following China’s decision to further ease COVID-19 restrictions, with gains curbed by rising yields.

Spot gold was up 0.5% to $1,806.69 per ounce by 1331 GMT. US gold futures rose 0.7% to $1,816.70. Gold is performing in line with risk assets, said Han Tan, chief market analyst at Exinity.

“Further signs that king dollar is loosening its grip on the safe-haven throne are also encouraging bullion bulls to restore spot prices back above the psychological $1,800 mark,” he said. The dollar index pared losses and was steady as risk sentiment improved on news of China relaxing quarantine rules, while benchmark 10-year yields rose to their highest in nearly a month.

Higher interest rates and bond yields increase the opportunity cost of holding the non-yielding precious metal. Top gold consumer China said on Monday that inbound travellers would no longer have to go into quarantine from Jan. 8, in a major step towards easing curbs on its borders, which have been largely shut since 2020.

Gold has gained nearly $200 after falling to a more than two-year low in late September, as expectations about slower interest rate hikes from the US Federal Reserve dimmed the dollar’s allure.

“Gold was weaker for most of 2022 amid aggressive tightening of monetary policies, rising real yields and dollar strength. But the tide has turned as Fed shifts into policy calibration mode,” said OCBC FX strategist Christopher Wong.

“Sustained recovery in gold prices is possible if Fed pivots.” Higher rates diminish gold’s anti-inflationary appeal and increase the opportunity cost of holding the asset as it pays no interest. In other metals, spot silver rose 1.4% to $24.04 per ounce, platinum dropped 1.3% to $1,008.49 while palladium jumped 1.9% to $1,797.75.