Gold prices struggled on Wednesday as the rising number of Omicron cases failed to boost the metal’s safe-haven appeal. Instead, it prompted market participants to price in a quarter percentage point rate hike by March.
The stronger dollar and higher yields also weighed on the bullion. The greenback rose close to a two-week peak and made the metal more expensive for investors using other currencies. The benchmark 10-year Treasury yields jumped to their highest level in more than a month. It raised the opportunity cost of owning the non-interest-bearing gold. Yesterday, federal funds futures were already priced in around 66% chance of a rate hike by March. And investors fully priced that scenario by May.
Spot gold is currently trading at $1,816.97 per ounce as of 0915 GMT.
Meanwhile, the coronavirus is rapidly spreading unabatedly in many nations. The U.S. reported nearly a million new cases, the highest daily tally in the world. That figure is almost double its previous week peak. The Biden administration doubled its order for Pfizer’s oral COVID-19 antiviral treatment. And the Centers for Disease Control and Prevention advised people seeking to end their COVID-19 isolation at five days to take a rapid antigen test.
India also doubled its new cases at 58,097. In Okinawa, Japan, officials are considering imposing emergency measures after new infections doubled on Wednesday. Several cities in China also implemented varying degrees of curbs against the coronavirus ahead of the upcoming Lunar New Year and the Winter Olympics.
Brian Lan, the managing director at GoldSilver Central, said higher yields, a stronger dollar and the anticipated rate hike in March are putting pressure on gold prices. Despite this, he expects the bullion to recover if Omicron is not reined and continues to be a global issue. Lan explained that it would force central banks to buy more gold.
Michael Langford, a director at corporate advisory firm AirGuide, noted that gold is overshadowed by other assets that provide better leverage to risk and returns. He predicted a short-term upside for gold at $1,820 an ounce. But for the medium term, he suggested that the bullion could go down below $1,800.
But DailyFX strategist Michael Boutros argued for a near-term price breakout. However, a breach above the 2021 high-close or 61.8% retracement of the 2020 decline at 1903/23 is needed for gold to resume its multi-year uptrend. He also mentioned that the IG Client Sentiment Index indicates a strong gold-bearish contrarian trading bias.