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Gold prices rise less than 1%, supported by fears of the Omicron spread

  • 01 December, 2021
  • 5:42 pm EET

Gold prices rose on Wednesday, as weak bond yields and uncertainty about economic growth due to the Omicron coronavirus mutated pushed investors to the safe haven of gold.

And the spot gold price rose 0.59% to $ 1748.92 an ounce by 10:20 GMT.

 

Impact Of Fed Members’ Statements

Gold fell to a one-month low on Tuesday after Federal Reserve Chairman Jerome Powell said the board would discuss whether to end bond purchases earlier than expected at the December meeting, and temporary is no longer the most accurate term to describe it. inflation.

Fed Vice Chairman Richard Clarida also said that lowering inflation is important to keep expectations steady near the Fed’s 2% target.

With the lower stimulus and rate hike planned by the US Federal Reserve, it will push government bond yields higher, increasing the opportunity cost of non-interest bearing gold.

US 10-year Treasury yields rose, but remained close to Tuesday’s close, which was the lowest in 3 weeks, which supported gold prices significantly.

 

Expert Forecasts For Gold Prices

The possibility of slowing economic growth and continued inflationary pressure could lead the “stagflation” debate to regain momentum and gold could benefit from this debate, said DailyForex analyst Warren Venkitas, but remains tied to the data on the nature of the omicron mutator.

In the same context, Credit Suisse expects gold prices to average $1,850 an ounce next year, before dropping to $1,600 in 2023.

“The Fed will raise rates once in the second half of next year, and between now and then inflation will remain elevated, resulting in very negative real rates, which is positive for gold,” Credit Suisse said in a note dated Tuesday.

Chief Market Analyst Nicholas Frapel commented: Gold prices have been relatively volatile recently, as it was difficult to know the impact of Omicron at the moment, with little data on it currently, continuing: “The market is driven by sentiment and not by the size of the epidemic.”

The United States has imposed stricter coronavirus testing rules for air travelers, while more countries have tightened their borders to contain the spread of the omicron variable.

Researchers around the world are racing to understand the full impact of the Omicron strain, which was first identified in South Africa and discovered in countries from the UK to Brazil.

 

SOURCE : BLOOMBERG

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