The implementation of Plan B's social restrictions in the UK dimmed risk appetite, but did not strengthen gold prices. Markets prefer the US Dollar amid expectations of the Fed's tapering.
Gold prices slipped due to the strengthening of the US Dollar in the trading session on Thursday (09/December) tonight. In the midst of the social restrictions imposed by the UK to prevent the spread of the Omicron variant, the safe haven function of the US Dollar is considered more attractive by investors than gold.
Spot gold was down 0.4% at $1774.80 an ounce, while gold futures on the Comex in New York were down 0.6% at $1775.40. At press time, the following chart of XAU/USD is showing a 0.26% decline to $1778.02.
The US dollar strengthened while world stocks stuck at high levels. The UK announced the implementation of Plan B restrictions to prevent the spread of the Omicron variant. The policy requires Britons to return to work from home, wear masks in public and take booster vaccinations. This is feared to have an impact on slowing economic activity.
Gold Market Watch Omicron Developments And The Fed's Tapering
Concerns about the pandemic will generally strengthen gold prices. However, the price of gold actually slipped because of the US Dollar tonight considering that the Omicron variant has proven not to have as bad an impact as the Delta variant. However, research is still ongoing. If the pandemic worsens again, it is not impossible that the price of gold will rise again.
"...Gold could find new demand if the market becomes even more spooked by the developments of the pandemic or widespread geopolitical tensions among developed countries," commented Han Tan, another analyst at Exinity. The geopolitical tensions in question refer to diplomatic tensions between Russia and Ukraine, the boycott of the Winter Olympics in Beijing by some Western countries, as well as US sanctions against Iran.
In addition, expectations of the Fed's tapering acceleration which will be decided next week are also a factor. "If the Fed enters tapering sooner than they announced at the previous meeting, then of course the probability of a rate hike increases. This is a negative for gold prices," said commodity analyst at Quantitative Commodity Research, Peter Fertig. Next, the market will focus on the US CPI Inflation data for clues on the Fed's tapering.
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