Omicron surge burnishes gold’s safe-haven appeal
But dollar strength and the market’s focus on interest rates keep a lid on price
Bengaluru — Gold prices edged higher on Wednesday as rising Omicron virus cases supported its safe-haven appeal, but trading was rangebound as investors awaited the minutes of the US Federal Reserve’s latest policy meeting as rate hike bets grow.
Spot gold was up 0.2% to $1,818.79/oz at 1025 GMT, with US gold futures rising 0.3% to $1,819.50.
“Gold is caught between two factors — supporting it is the very high number of Covid-19 cases that feeds into the gold safe-haven appeal,” said Ricardo Evangelista, senior analyst at ActivTrades.
“The factor offering gold some resistance is the strength of the dollar and the likelihood that the dollar could get even stronger because of the Fed’s tightening monetary policy.”
Markets are awaiting the Fed’s minutes of its last policy meeting of 2021 — on December 14 and 15 — which are due at 1900 GMT. They could provide clues on the US central bank’s plan on rate hikes and the tapering of its pandemic-induced stimulus.
Markets have ramped up bets on a quarter percentage point rate increase by March and fully priced one in by May. Higher interest rates increase the opportunity cost of holding gold.
The dollar held below its two-week highs, while benchmark 10-year treasury yields were slightly lower after rising to their highest level in more than a month in the previous session.
The ADP labour market data will be of greater interest to the gold price and it is likely to confirm the good state of the US labour market, Commerzbank said in a research note. “If the US dollar and/or bond yields respond to the figures, the gold price should also begin moving.”
The US non-farm payrolls data on Friday is also on investors’ radar.
In other metals, spot silver was little changed at $23.06/oz, platinum inched up 0.9% to $980 and palladium rose 2.1% to $1,910.08.
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