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Gold jumps as new virus variant fears grip investors

Gold gained on Friday as concerns about a hit to the global economic recovery, due to the spread of a new coronavirus variant identified in South Africa, drove investors to the safety of bullion.

·         Spot gold jumped 0.9% to $1,805.26 per ounce.

·         U.S. gold futures advanced 1.2% to $1,805.20.

·         The variant spreading in South Africa possibly evades immune responses and has prompted Britain and the European Union to halt travel from the African nation.

·         “Markets fear this new variant could weigh more strongly on the economy than the Delta variant discovered a year ago and this has spurred some safe-haven demand for gold,” Quantitative Commodity Research (QCR) analyst Peter Fertig said.

·         European stocks tumbled and were set for their worst session in more than a year.

·         Aiding gold’s climb, the dollar index eased 0.4% from a 16-month peak scaled earlier this week, reducing bullion’s cost to buyers holding other currencies. U.S. benchmark 10-year Treasury yields also weakened.

·         On a weekly basis though, the metal was heading for its worst week since Aug. 6 on increased expectations that the Fed could taper its asset purchases and raise interest rates at a faster pace.

·         Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of non-interest-bearing gold.

·         Michael Langford, director at corporate advisory AirGuide, expects gold to decline further on higher chances of Fed sticking to its tapering timeline.

·         “The Fed is unlikely to alter its taper timeline as monetary policies are closely intertwined with the government’s public sentiment that any change would be negative for their election prospects, limiting gold’s decline.”

·         Elsewhere, platinum fell 2.3% to $972.67, while palladium dropped 2.6% to $1,812.28.

·         QCR’s Fertig attributed palladium and platinum’s declines to fears the new variant could hurt auto consumption as well as demand for the precious metals used in automobile exhaust systems.

·         Spot silver was down 0.5% at $23.45 per ounce.

 

·         Yen, franc surge as new virus variant rattles markets

The Japanese yen and the Swiss franc surged on Friday, while the Australian dollar and the Norwegian crown slumped, as investors fled for shelter following the discovery of a new coronavirus variant that could resist current vaccines.

Closed U.S. markets for Thanksgiving holidays meant market moves were more volatile in thin trading as traders rushed to dump long positions in the euro and the U. S. dollar.

Overnight headlines took markets by surprise with little known of the new COVID-19 variant, detected in South Africa, Botswana and Hong Kong. But scientists reckon it has an unusual combination of mutations and may be able to evade immune responses or make it more transmissible.

The yen jumped 1% versus the dollar while the euro fell to near 6-1/2 year lows against the Swiss franc at 1.044 francs per euro.

Britain said the new variant was considered by scientists to be the most significant one yet found as it cancelled flights to a few countries.

Sterling slipped to a new 2021 low below $1.33.

Gains for the yen, franc and euro pushed the dollar index =USD - which measures the greenback against those and three other currencies - further away from Wednesday’s 96.938, its highest in nearly 17 months. It last traded at 96.60, down 0.2%.

 

·         Treasury yields sink amid concerns around a new Covid variant, 10-year yield falls below 1.5%

U.S. Treasury yields slid on Friday, reversing recent gains amid concerns around a new variant of the coronavirus found in South Africa.

The yield on the benchmark 10-year Treasury note dropped by more than 15 basis points to 1.485%. The yield on the 30-year Treasury bond fell more than 14 basis points to 1.826%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

 

·         Fed's Bostic says he remains open to faster taper and one or two rate hikes in 2022

Atlanta Federal Reserve President Raphael Bostic said on Friday he is hopeful that the momentum of the U.S. economy will carry it through the next wave of the coronavirus pandemic, and said he remains open to accelerating the pace of the central bank's bond taper.

Earlier on Friday, the World Health Organization said it was designating the new Omicron variant, first identified in South Africa, as being "of concern."

 

·         COVID-19 NEW UPDATES:

·         Vaccine makers move quickly against new omicron Covid variant, testing already under way

 

·         Rampant Covid variant spreads to UK, Germany and Italy

 

·         No cases of new omicron Covid variant in the U.S. have been detected, CDC says

 

·         U.S. to restrict travel from South Africa, 7 other countries as new Covid variant emerges

 

·         Australia's reopening plans in doubt after Omicron cases

 

·         EU COVID-19 passports, vaccines helped European tourism recovery -UN report

 

·         Black Friday shopping in stores drops 28% from pre-pandemic levels as shoppers spread spending throughout the season

 

·         ECB has other purchase programmes in toolkit than PEPP, Lagarde says

The European Central Bank is likely to stop further bond purchases under its pandemic-era support scheme from early next year but will still have other purchasing programmes in its toolkit, President Christine Lagarde was quoted as saying by a German daily.

The ECB backstop Pandemic Emergency Purchase Programme (PEPP) has allowed the vulnerable bond markets of Italy, Spain, Portugal and Greece to borrow and spend freely during the coronavirus pandemic without being punished by investors.

 

·         China’s industrial profits growth accelerates in October

Profits in October rose 24.6% from a year earlier to 818.7 billion yuan ($128.1 billion), the official data showed, quickening from a 16.3% gain reported in September.

The industrial profit data covers large firms with annual revenues of over 20 million yuan from their main operations.

 

·         China’s real estate uncertainties persist, fueling market anxiety

Wild swings in Chinese real estate stocks and bonds are keeping investors on edge — these news headlines could cause troubles in the sector to spill into the rest of the economy, says S&P Global Ratings.

While the plunge in Evergrande’s shares has abated, the volatility in other Chinese real estate companies has continued this month.

 

Reference: CNBC, Reuters, Worldometers