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Gold rebounds as traders weigh Omicron against hawkish Powell

Spot gold advanced 0.4% to $1 781.31 an ounce as of 4:28 p.m. in New York, after falling 0.6% on Tuesday.
Image: Chris Ratcliffe/Bloomberg

Gold rebounded from a three-week low as traders weighed the spread of the omicron coronavirus variant against comments by Federal Reserve Chair Jerome Powell on the need to curb inflation.

Researchers worldwide are racing to understand the full impact of the strain, first identified in South Africa and detected in countries from the UK to Brazil. It has prompted a raft of travel restrictions to curtail its spread, and sparked concerns about whether the strain could evade the protection of vaccines and fuel new surges in infections. Powell reinforced his message that the US central bank would keep inflation in check and said for the second time in two days that officials should consider speeding up how quickly they withdraw policy support.

There are “polarising views” on gold’s future after Powell’s comments, according to StoneX analyst Rhona O’Connell, though she said investors should remember that inflation-adjusted yields are still in negative territory, which is positive for gold as it generates no interest. And Powell’s comments don’t necessarily mean interest rate hikes will come soon. There’s a lower bar to speed up tapering, compared with raising interest rates, and given the omicron variant, the US central bank would want to do that anyway, O’Connell said.

Bullion posted a marginal loss last month as investors weighed the prospects of the Fed dialing back on pandemic-era stimulus amid elevated consumer prices alongside uncertainty surrounding the omicron variant’s impact on the global recovery. The US central bank is currently scheduled to complete its asset-purchase program in mid-2022 under a plan announced at the start of November to slow buying by $15 billion a month.

Spot gold advanced 0.4% to $1 781.31 an ounce as of 4:28 p.m. in New York, after falling 0.6% on Tuesday. Bullion for February delivery rose 0.4% to settle at $1 784.30 on the Comex. The Bloomberg Dollar Spot Index was up 0.1%, reversing the previous day’s decline. Silver and platinum fell, while palladium gained.

© 2021 Bloomberg

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