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Gold eases as investors assess Omicron impact, Fed plans

Gold eased in choppy trading on Monday as investors tried to gauge the impact of soaring Omicron coronavirus cases and the extent of the U.S. Federal Reserve’s rate hikes on soaring inflation.

·         Spot gold fell 0.2% to $1,793.33 per ounce, as of 1845 GMT, while U.S. gold futures settled down 0.6% at $1,794.60 per ounce.

·         Global equities retreated on worries over the impact of tighter COVID-19 curbs, but safe-haven inflows into gold seemed to have stalled.

 

·         Gold also found little support from a lower dollar.

 

·         This was in contrast to Friday, when Omicron-led worries pushed gold prices to a peak since Nov. 26.

 

·         “Gold had a nice little bit of a rally and now we’re entering that holiday period where there’s no longer full participation from traders and you’re probably going to see reduced appetite for risk doing little to help gold,” said Ed Moya, senior market analyst at brokerage OANDA.

The choppiness is likely to persist into the year-end before an eventual consolidation above the key $1,800 level in the next month or so amid Omicron headlines, Moya added.

·         Although bullion is considered a hedge against higher inflation and uncertainties, rate hikes would increase the opportunity cost of holding non-yielding gold.

But Omicron-led uncertainty could lead to a more dovish central bank narrative in 2022, helping gold, analysts said.

·         “We could still see modest upside for precious metals as the bearish tilted positioning slate suggests the metal may be more responsive to any doubts that begin to arise surrounding the Fed’s ability to deliver on their hawkish stance,” TD Securities said in a note.

 

·         Worries about the economic impact of COVID-19 curbs seemed to have seeped into the other metals, which tend to follow wider market cures more closely.

 

·         Palladium dropped 2% to $1,746.85 per ounce, while platinum rose 0.1% to $930.50 per ounce. Silver shed 0.3% to $22.28.

 

·         Aussie, pound struggles on Omicron, lockdown fears; yen shines

Currencies including the Australian dollar and British pound fell on Monday on fears further curbs could be imposed in Europe to contain the Omicron coronavirus variant.

With last week’s slew of major central bank meetings out of the way, investors turned their focus to the rapid spread of the variant.

The Netherlands went into lockdown on Sunday and local newspapers in Italy reported that new restrictions were being considered there too.

The Australian dollar, which is seen as a liquid proxy for risk appetite, was down 0.2% at $0.7109 at 1230 GMT, having earlier hit its lowest in 13 days .

Britain’s pound was down 0.2% at $1.32105.

British Health Minister Sajid Javid on Sunday did not rule out the possibility of further lockdowns before Christmas.

Goldman Sachs cut its U.S. growth forecasts and the U.S 10-year Treasury yield fell to its lowest since Dec. 6 on Monday.

The U.S. dollar index was at 96.544 at 1231 GMT, not far from last month’s peak of 96.938, which was its highest since July 2020.

Speculators’ net long bets on the U.S. dollar, or bets that the dollar will rise, edged higher in the week to Dec. 14, reflecting a growing desire among market participants to hold the greenback.

Elsewhere, the euro was up 0.3% at $1.12695, only partly recovering after tumbling 0.8% on Friday after the European Central Bank took tentative steps to exit its pandemic-era stimulus.

China cut its lending benchmark rate for the first time in 20 months to prop up its slowing economy, sending the yuan to a 10-day low.

 

·         U.S. Treasury yields rise slightly as investors assess omicron risk

U.S. Treasury yields rose slightly on Monday, as investors grew concerned that that omicron Covid variant will derail the recovery.

The yield on the benchmark 10-year Treasury note rose 2.6 basis points to 1.428% at around 4:30 p.m. ET. The yield on the 30-year Treasury bond moved 3.7 basis points higher to 1.854%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

 

·         Stocks slide to start the week as omicron fears intensify, Dow falls 430 points

 

·         With Biden spending plan blocked, economists lower 2022 growth forecasts

Some economists expect the U.S. economy to grow more slowly next year after a key Democratic lawmaker dealt a seemingly fatal blow to President Joe Biden's $1.75 trillion spending plan, further clouding an outlook that was facing heightened risk from the rapid spread of the Omicron variant of COVID-19.

Goldman Sachs lowered its GDP growth forecast for 2022 as did Mark Zandi, chief economist for Moody's Analytics, after U.S. Senator Joe Manchin said on Sunday he could not support Biden's ambitious "Build Back Better" proposal, which would expand the social safety net and tackle climate change.

Economists projected earlier this month that growth would slow next year as the lift provided by earlier spending programs faded and the Federal Reserve reduced its monetary policy accommodation in the face of high inflation.

 

·         ECB's Centeno warns of inflation uncertainty, urges caution

European Central Bank Governing Council member Mario Centeno said on Monday there was "uncertainty" about inflation that required constant monitoring, but that fresh anti-COVID-19 lockdowns in Europe should not lead to price increases.

 

·         BOJ's Kuroda: too early to consider normalising monetary policy

 

·         China expected to extend regulatory crackdowns into 2022

·         S.Korea sees steady recovery, slightly increases 2022 growth forecast

 

·         COVID-19 UPDATES:

 

·         Omicron casts a shadow over winter holidays as countries consider serious restrictions

 

·         WHO sounds warning over fast-spreading Omicron

 

·         WHO warns against concluding Omicron is milder variant

 

·         Omicron variant accounts for 73% of U.S. infections -CDC

 

·         New York City expects omicron infections to rapidly surge but peak in a matter of weeks, mayor says

 

·         Omicron infections appear no less severe than Delta; COVID-19 lowers sperm count, motility

 

·         UK says COVID surge 'extremely difficult' as Omicron grips Europe

British Prime Minister Boris Johnson said on Monday he would tighten coronavirus curbs to slow the spread of the Omicron variant if needed, after the Netherlands began a fourth lockdown and as other European nations consider Christmas restrictions.

 

Reference: Kitco, CNBC, Reuters, Worldometers