Gold prices edged higher on Wednesday due to softer U.S. Treasury yields and concerns over the economic impact of the Omicron variant of the coronavirus. The benchmark 10-year yields remained near their three-week trough. It reduced the opportunity cost of holding the non-interest-bearing bullion. Earlier in the session, the yellow metal dropped by a one-month on U.S. Federal Reserve Chairman Jerome Powell’s hawkish remarks.

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Spot gold is currently trading at $1,785.61 per ounce as of 0801 GMT.

In his testimony before the Senate Banking Committee, Powell said they would discuss ending their bond purchases earlier than previously anticipated in their December meeting. He pointed to a strong economy, delayed labor market growth and elevated inflation. Vice-Chair Richard Clarida added that they are not happy with inflation running at 4% or 5% when their target is 2%.

Harshal Barot of Metals Focus noted that Powell’s comment generated additional headwinds for the bullion in the short term. But its impact is minimal because a quicker-than-anticipated tapering was already priced in. Also, the Omicron variant brings a lot of uncertainty.

Credit Suisse analysts added that even if the Fed raises interest rates in the second half of 2022, inflation will remain high between now and then. It will push real rates to negative territory, which would be positive for gold.

Edward Moya of OANDA said everyone was surprised by Powell’s hawkish tone. But like Barot, he expects the new COVID-19 variant to support gold in the long term.

On Tuesday, the World Health Organization (WHO) advised travel postponement but warned countries not to impose blanket travel bans. It suggested applying an evidence-informed and risk-based approach to travel measures. Scientists and governments are still trying to determine the effectiveness of existing vaccines against Omicron.

BioNTech and Pfizer said their vaccine would likely offer strong protection against the new variant. The University of Oxford said there was no evidence that their vaccine developed with AstraZeneca would be ineffective against Omicron, but they are ready to update it.

On the technical front, DailyFX strategist Daniel McCarthy noted that gold might have some bearish momentum.  He explained that the bullion has fallen below simple moving averages. McCarthy predicted resistance level at $1,778.69, $1,813.96, $1,815.60 and $1,834.14. He expected support to be at previous lows of $1,721.17, $1,750.25 and $1,758.93.