Gold prices take advantage of the weakening US Dollar ahead of the release of the FOMC minutes. In addition, rising cases of Omicron add to the interest in safe havens.
Gold prices rose in the trading session on Wednesday (05/January) night due to the weakening US Dollar and the increase in Omicron cases in a number of countries. Spot gold rose 0.1% to $1817.10 an ounce, in line with New York's Comex gold futures price which rose 0.2% to $1818.50. The following chart of XAU/USD also shows a gain of 0.55% to $1824.09.
Ahead of the release of the minutes of the FOMC meeting, the US Dollar eased from a two-week high. Markets are anticipating the Fed's chances of raising interest rates this year and how fast the tapering rate of bond purchases will be.
But in the long term, ActivTrades analyst Ricardo Evangelista warns that gold prices are still under threat from US Dollar bulls. This is especially so if the Fed is increasingly aggressive in tightening monetary policy. "Factors that offer a turning point in gold's strengthening are the strengthening of the US dollar, and the possibility that the currency will strengthen further due to the Fed's tight monetary policy," Evangelista said.
In addition, the issue of inflation is one of the main highlights of the market. "... Concerns about rising inflation that surfaced, invite buying interest in the gold market as a safe haven," said Jim Wyckoff, analyst at Kitco Metals.
Omicron Infection Cases Soar
Although the symptoms are not as lethal as the Delta variant, the transmission rate of Omicron has been shown to be faster. According to a New York Times report, the average daily case addition in the US is now at 547,000, more than double the peak of the previous pandemic, and 254% higher than the average two weeks ago. The CDC (The Centers for Disease Control and Prevention) estimates that 95% of new cases in the US are infections with the Omicron variant. In response to this situation, the US Food and Drug Administration earlier this week approved the third dose of Pfizer and BioNTech vaccinations for children ages 12-15.
"Gold prices rose even though the market put a 70% percentage for a possible Fed rate hike in March. This is because the market's interest in safe havens increased in line with the surge in infections of the Omicron variant and weakening equity prices," wrote TD Securities analysts.
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