Jump to content

Gold Prices Struggle Even as Markets Convulse Amid Omicron Fears


MongiIG

Recommended Posts

GOLD PRICE OUTLOOK:

  • Gold prices seesawed on Omicron variant news as real rates rose
  • Testimony from Fed Chair Powell now in focus, may offer support
  • Technically, prices are testing the mettle of a three-month uptrend

Gold Prices Struggle Even as Markets Convulse Amid Omicron Fears

Gold prices seesawed as illiquid financial markets drained dry by US Thanksgiving holiday closures convulsed on World Health Organization (WHO) reports of a new “of-concern” Covid-19 variant, dubbed Omicron. Bullion initially rallied as bond yields fell and the futures-implied Fed rate-hike path flattened a bit for 2022-23.

Gains would prove to be short-lived however, with a rapid intraday reversal bringing gold nearly all the way to flat by the daily close. Worries about a slowdown in growth in the event of another wave of lockdowns pulled down inflation expectations. In turn, that lifted real interest rates (nominal rates less expected inflation).

This undermined gold’s store-of-value appeal. The metal yields nothing, but a return of 0% seems attractive when compared to a negative one on cash, after accounting for inflation. The rise in real rates cut into that appeal, pulling prices down off the highs as the markets weighed Omicron’s potential implications.

The way forward may hinge on incoming comments from Fed Chair Jerome Powell. He is due to testify before Congress this week and will almost certainly face a grilling on how Omicron or even some future problematic variant might echo in the Fed’s rate-hike plans.

Mr Powell may revert to a familiar script, reiterating the Fed party line that rapid reflation owes mostly to “transitory” factors and hinting that policymakers are not in a hurry. This might be amplified with some mention of two-way risk in the size of the monthly QE taper. Gold may find support against such a backdrop.

GOLD TECHNICAL ANALYSIS – THREE-MONTH UPTREND IN THE BALANCE

Gold prices are idling above support guiding them higher since August. Immediate resistance is capped at 1808.16, with a daily close above that exposing the next barrier at 1834.14. Alternatively, securing a break of 1750.78 might hand sellers the initiative, with support anchored at 1717.89 in view thereafter.

Gold price chart - daily

Gold price chart created using TradingView

GOLD TRADING RESOURCES

Written by Ilya Spivak, Head Strategist, APAC for DailyFX. 29th November 2021.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      17,345
    • Total Posts
      81,508
    • Total Members
      65,955
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    overreach
    Joined 28/01/22 19:57
  • Posts

    • Market data to trade the week of 31 January: ECB; Alphabet earnings The central bank spotlight continues next week with the BoE and ECB attracting the most attention from markets. Daniela Sabin Hathorn | Presenter and Analyst, London | Publication date: Friday 28 January 2022 15:50 IGTV’s Daniela Sabin Hathorn is joined by IG’s chief market analyst, Chris Beauchamp, as he looks at EUR/USD ahead of the ECB interest rate decision on Thursday, and Alphabet shares ahead of their Q4 earnings release. https://www.ig.com/uk/market-insight-articles/market-data-to-trade-the-week-of-31-january--ecb--alphabet-earni-220128
    • With a hawkish Fed and further evidence of an economy running hot, IGTV’s Jeremy Naylor highlights the strong dollar trade against a number of other currencies, including EUR, JPY, CAD, AUD and GBP. https://www.ig.com/uk/market-insight-articles/trade-idea-28-1-22--long-usd-220128    
    • Live Coverage: Bank of England Rate Decision February 2022
×
×
  • Create New...