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Gold rises 1% as virus jitters, lower yields lift demand

Gold prices rose nearly 1% on Friday as uncertainty sparked by the Omicron coronavirus variant and a dip in U.S. Treasury yields boosted the safe-haven metal’s appeal.

 

·         Spot gold was up 0.9% at $1,785.29 per ounce by 03:12 p.m. ET (2012 GMT).

·         U.S. gold futures settled 1.2% higher at $1,783.90.

 

·         “Gold is benefiting from a flight-to-safety as investor worries around a faster Federal Reserve taper and the COVID situation as both Delta and Omicron pose a risk to short-term growth outlook,” Edward Moya, senior market analyst at brokerage OANDA.

 

“Gold’s end of week performance is significant as it coincides with curve flattening that includes high expectations for a faster Fed taper.”

 

·         Sentiment in wider financial markets remained weak, with the Nasdaq tumbling over 2%, as mixed U.S. jobs data and fears around the Omicron coronavirus variant weighed.

 

·         Further lending support to gold, the U.S. 10-year bond yield dropped below 1.4% for the first time since September, reducing the opportunity cost of holding non-interest bearing gold.

 

However, gold was still on track for its third consecutive weekly loss, down 0.4%, as Fed officials struck a hawkish tone on stimulus tapering and interest rates.

 

·        SPDR GOLD HOLDINGS

 

·         Data on Friday showed U.S. employment growth slowed considerably in November, but the unemployment rate plunged to a 21-month low of 4.2%, suggesting the labor market was rapidly tightening.

 

·         Fed policymakers look likely to accelerate the winddown of their bond-buying program when they meet later this month as they respond to a tightening labor market and move to open the door to earlier rate hikes than they had projected.

 

·         Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.

 

·         Elsewhere, spot silver gained 0.6% to $22.51 per ounce.

 

·         Platinum fell 1.1% to $927.07, while palladium gained 1.2% to $1,802.51.

 

·         Stocks, yields slide after U.S. jobs report as Omicron looms

Global equities and benchmark U.S. bond yields tumbled on Friday in volatile trade after data showed U.S. job growth slowed considerably in November and the Omicron variant of the coronavirus kept investors on edge.

The yield on 10-year U.S. Treasury notes fell 9.8 basis points to 1.351% and the tech-heavy Nasdaq Composite stock index slid almost 3% at one point as investors anticipated slower economic growth next year.

 

·         Sterling extends losses as dollar rises after U.S. data

In currencies, the U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96,202, continuing its rise from levels around 96.1 in the previous session.

Sterling weakened on Friday as the potential for earlier Federal Reserve interest rate hikes strengthened the dollar, while there was still uncertainty about whether the Bank of England will lift rates this month.

BoE policymaker Michael Saunders, who voted for an interest rate hike in November, said on Friday he wanted more information about the impact of the new Omicron coronavirus variant before deciding how to vote this month.

The dollar rose on Friday after the U.S. jobs report showed solid details that suggested the Fed’s plan to accelerate tapering of its asset purchases and to hike rates next year remained intact.

Sterling fell 0.6% to $1.3218, close to its lowest level since December 2020 of $1.3194 hit on Tuesday.

 

·         U.S. labor market tightening; jobless rate flirts with pre-pandemic lows

U.S. employment growth slowed considerably in November amid job losses at retailers and in local government education, but the unemployment rate plunged to a 21-month low of 4.2%, suggesting the labor market was rapidly tightening.

 

The four-tenths-of-a-percentage-point drop in the jobless rate from October reported by the Labor Department in its closely watched employment report on Friday occurred even as 594,000 people entered the labor force, the most in 13 months. Workers put in more hours, boosting aggregate wages, which should help to underpin consumer spending.

·         U.S. service sector activity gauge hits record high in November - ISM survey

A measure of U.S. services industry activity unexpectedly rose in November, hitting a fresh record high as businesses boosted hiring, but there was little sign that supply constraints were easing and prices remained high.

The Institute for Supply Management said on Friday its non-manufacturing activity index increased to 69.1 last month, the highest reading since the series started in 1997, from 66.7 in October. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity.

 

·         Faster Fed taper, earlier rate hikes in sight as unemployment falls

 

·         Omicron variant likely to usher growth downgrades -IMF's Georgieva

Global economic growth projections from the International Monetary Fund will likely be downgraded due to the emergence of the Omicron variant of the coronavirus, IMF Managing Director Kristalina Georgieva said on Friday.

"A new variant that may spread very rapidly can dent confidence, and in that sense, we are likely to see some downgrades of our October projections for global growth," Georgieva said during the Reuters Next conference.

The IMF's head added that the strength of the U.S. economy has a positive spillover effect around the world even if it means the U.S. Federal Reserve will wind down its accommodative policy stance in the months ahead, as most economists now expect.

"We do believe that the path to policy rate increases may be walked faster," she said, pointing to 2022 as a likely target.

 

·         Omicron-fuelled volatility deals hedge funds worst monthly return since March 2020

 

·         Wall St closes lower on Omicron worries, Fed taper angst

On top of this he pointed to concerns that the Omicron variant appeared to be spreading faster than Delta, the last most prevalent version of COVID-19.

The number of countries reporting Omicron cases kept rising on Friday but there was still little clarity on the severity of the disease or the level of protection provided by existing COVID-19 vaccines. read more

The Dow Jones Industrial Average (.DJI) fell 59.71 points, or 0.17%, to 34,580.08, the S&P 500 (.SPX) lost 38.67 points, or 0.84%, to 4,538.43 and the Nasdaq Composite (.IXIC) dropped 295.85 points, or 1.92%, to 15,085.47.

The S&P, the Dow and the Nasdaq all registered declines for a week in which they swung wildly from day to day as investors reacted to Omicron news and Powell's comments.

The S&P's decline of 1.2% was its second weekly decline in a row while the Nasdaq fell 2.62%, also its second straight week of losses. The Dow dropped 0.92% in its fourth consecutive weekly decline.

 

·         Europe stocks end the week lower amid omicron fears; U.S. jobs data disappoints

 

·         Japan markets set to dip; investors monitor bitcoin volatility

Investors will continue to monitor crypto after bitcoin prices were volatile throughout the weekend, dropping sharply Saturday afternoon during Asia hours.

 

·         Bitcoin holds steady below $50,000 in volatile weekend trading

Bitcoin prices bounced around on Sunday but remained below $50,000, with the volatility continuing a weekend of wild trading that sent the cryptocurrency tumbling more than 17% in just 24 hours.

The cryptocurrency traded at $49,122 around 5 p.m. Sunday on Wall Street, according to data from Coin Metrics.

·         Oil mixed as OPEC+ poised to act if demand weakens

Crude prices ended little changed on Friday after erasing earlier big gains on growing worries that rising coronavirus cases and a new variant could reduce global oil demand.

Earlier in the day, oil prices climbed more than $2 a barrel after producer group OPEC+ said it could review its policy to hike output at short notice if a rising number of pandemic lockdowns chokes off demand.

Brent futures rose 21 cents, or 0.3%, to settle at $69.88 a barrel, while U.S. West Texas Intermediate (WTI) crude ended 24 cents, or 0.4%, lower at $66.26.

Both benchmarks declined for a sixth week in a row for the first time since November 2018, and both remained in technically oversold territory for a sixth straight day for the first time since September 2020.

 

·         WHO says Covid omicron variant detected in 38 countries, early data suggests it’s more contagious than delta

 

·         In Europe, Omicron ruins Christmas party plans

 

·         COVID-19 UPDATES:

·         Goldman Sachs cuts U.S. GDP growth forecast for 2022 over Omicron fears

Goldman Sachs on Saturday cut its outlook for U.S. economic growth to 3.8% for 2022, citing risks and uncertainty around the emergence of the Omicron variant of the coronavirus.

Goldman economist Joseph Briggs said in a note that the Omicron variant could slow economic reopening, but the firm expects "only a modest drag" on service spending.

The firm now sees 2022 gross domestic product (GDP) growth of 3.8%, down from 4.2% previously on a full year basis, and Q4/Q4 growth of 2.9%, down from 3.3% before, Briggs said.

 

·         Taiwan says is important partner, will keep talking to U.S. on currency

Reference: CNBC, Reuters, Worldometers