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Gold prices edged lower on Monday as the dollar and U.S. Treasury yields firmed, although rising inflation and uncertainty over the Omicron coronavirus variant limited losses, while investors focused on U.S. consumer prices data due later this week.

·         Spot gold fell 0.3% to $1,778.09 an ounce by 01:42 p.m. ET (1842 GMT), while U.S. gold futures settled down 0.3% at 1,779.50.

·         SPDR GOLD HOLDINGS:
NET SELL OF DECEMBER MORE THAN 10 TONNES

 

·         The dollar strengthened, making gold more expensive for overseas buyers, while U.S. 10-year Treasury yields rebounded.

 

 ·         Global stock markets staged a tentative rebound from last week's selloff driven by worries over the spread of Omicron.

 

·         "Gold is going to remain in a choppy trading environment as there is a push-pull in the market; one side, we have the market anticipating faster tapering and on the other, we have safe-haven demand at the idea of inflation running hot," said David Meger, director of metals trading at High Ridge Futures.

 

·         Consumer price data on Friday would provide more cues on the U.S. Federal Reserve's policy strategy. read more

A milder CPI reading, though unexpected, could reduce some of the focus on interest rate increases in 2022, while additional weakness in stock markets into December could also drive some safe-haven demand into gold, said Saxo Bank analyst Ole Hansen.

·         Interest rate hikes raise the opportunity cost of holding non-yielding bullion.

 

·         Spot silver fell 1.2% to $22.25 an ounce.

·         Auto-catalyst metal platinum rose 0.4% to $935.73.

·        Palladium was up 2% at $1,846.27.

 

·         "Auto demand is forecast to recover in 2022 as vehicle production improves modestly on two consecutive weak years," analysts at Heraeus precious metals wrote in a note.

"Palladium will benefit from higher loadings in China to meet stricter emissions standards, and platinum demand will be boosted by increasing use in heavy duty vehicles and some substitution of palladium in gasoline vehicles."

·         Dollar up against safe havens as risk sentiment improves on Omicron news

The U.S. Dollar Currency Index , which measures the greenback against six rivals, was 0.1% higher at 96.309, not far from the 16-month high of 96.938 touched late last month.

Investors have grown more bullish on the dollar in recent weeks, with net long bets on the greenback climbing to the highest level since June 2019, data from the U.S. CFTC showed on Friday.

·         Omicron shows policymakers can't let guard down -BIS

 

·         Investors brace for potential hit to earnings because of Omicron

As details of a new COVID-19 variant emerge, investors are bracing for a potential hit to U.S. corporate earnings, particularly among retailers, restaurants and travel companies.

News of the Omicron variant comes in the middle of the holiday shopping period, and many businesses are already struggling with higher inflation and supply chain snags because of the pandemic.

 

·         ‘Modest downgrade’: IMF likely to cut euro zone growth forecasts amid inflation, omicron fears

The International Monetary Fund could be about to cut growth forecasts for the euro area as concerns over the omicron Covid variant and persistently higher inflation grow.

The Fund said in October that it expected the euro zone economy to grow by 4.3% in 2022. Now, the institution has warned about the “possibility of modest revisions” when it presents new estimates next month.

·         Euro zone upbeat on growth despite Omicron, to continue fiscal support

Euro zone finance ministers remained upbeat on Monday about economic growth prospects despite the Omicron coronavirus variant, and they agreed to continue moderately supportive fiscal policy next year.

The Omicron variant has increased concern among some economists that more lockdowns could be in store, which could lower growth after this year's roller-coaster ride.

But the ministers were less concerned.

"The euro area economy is recovering from the recession faster than expected," the ministers, called the Eurogroup, said in a statement, citing the latest European Commission forecasts for GDP growth of 5% in 2021 and 4.3% in 2022.

 

·         Biden set to warn Putin in video call: Expect ‘substantial’ economic punishment if Russia attacks Ukraine

President Joe Biden will warn Russian leader Vladimir Putin that the U.S. is prepared to impose severe economic countermeasures if Moscow carries out an attack on Ukraine, a senior administration official told reporters Monday.

The video call, which is set for Tuesday, will happen against a backdrop of amped-up tensions triggered in part by an alarming deployment of Russian troops and defense equipment along the country’s border with Ukraine.

 

·         Biden and Putin head into Ukraine talks with scant room for compromise

 

·         U.S. announces diplomatic boycott of Beijing Winter Olympics over human rights abuses

The U.S. on Monday announced a diplomatic boycott of the 2022 Winter Olympics in Beijing, a move that had garnered bipartisan support from critics of China’s human rights record.

While U.S. athletes will still participate, President Joe Biden’s administration will not send any official representation to the games, given China’s “ongoing genocide and crimes against humanity in Xinjiang and other human rights abuses,” White House press secretary Jen Psaki told reporters.

 

·         Evergrande moves toward restructuring; state swoops in to contain risk

China Evergrande Group (3333.HK) has set up a risk management committee as the cash-strapped property developer inches closer to a debt restructuring that has loomed for months over global markets and the world's second-largest economy.

The real estate giant, which is grappling with over $300 billion in liabilities and is at risk of becoming China's biggest ever default, said on Monday that the committee included officials from state entities and would play an important role in "mitigating and eliminating the future risks" of the group.

 

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