Gold prices rose on Monday as concerns about the new Omicron variant of the COVID-19 virus overshadowed the dollar’s strength. The green greenback rose 0.2% and made the yellow metal more expensive for investors using rival currencies. Meanwhile, market participants are assessing whether Omicron could change the Federal Reserve’s hawkish policy stance.
Spot gold is currently trading at $1,794.54 per ounce as of 0810 GMT (GLD).
Dr. Angelique Coetzee, chair of the South African Medical Association who first detected the new coronavirus strain, said symptoms were so far mild. But the World Health Organization (WHO) considered it a variant of concern that could potentially be more contagious than the previous variants.
Omicron has been detected in several countries, including South Africa, Australia, Belgium, Botswana, Britain, Canada, Denmark, France, Germany, Hong Kong, Israel, Italy and the Netherlands. Many countries have already imposed travel bans on Southern Africa to control the spread of this new variant.
Harshal Barot, a senior research consultant at Metals Focus, noted that the Omicron variant supported gold’s downside. He said it is too early to tell if it has eased rate hike expectations. But it could force the Fed to scale back its tapering and rake hike plans.
However, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday that he remained open to accelerating the pace of tapering. At the current pace, it would be completed by the middle of next year. But Bostic said it could be reasonable to end it by the first quarter or early in the second quarter of 2022. He is also open to one or two rate hikes in 2022 if inflation remains elevated.
Bostic suggested that Omicron could cause less economic impact than the Delta if it follows the pattern of the previous variants. He is also hopeful that the momentum of economic growth can carry the U.S. through the next wave of the pandemic.
In physical trading, gold demand rose last week in major Asian hubs. A price correction encouraged jewelers to increase their purchases. Local gold futures dropped by 47,253 rupees, the lowest level in two weeks. Indian dealers are now preparing for a surge in buying as the wedding season approaches.
Lower local prices in China and Japan also boosted retail demand. In contrast, the gold market in Singapore has been sluggish due to equities selloff.
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