Low liquidity makes the market more sensitive to issues. Gold prices rose on the back of concerns over an increase in Omicron.
Gold prices rose to near one-week highs in the trading session Monday (27/December) evening. Concerns over the risk of infection of the post-holiday Omicron variant helped gold prices rise. The XAU/USD chart below shows gains of more than half a percent to $1811.91.
Meanwhile, spot gold prices rose 0.3% to $1812.21 per ounce, as well as gold futures prices on the Comex New York which rose 0.1% to $1812.80. In general, gold prices have remained above $1800 since last week.
The increase in gold prices tonight was due to low liquidity in the midst of market holidays in the context of Christmas and New Year.
"Although the US dollar tends to be strong, the price movement of gold is not so much today. In this calm week, low liquidity makes any headlines more sensitive, because a quiet market tends to create more agitated price action if something happens," commented Ilya. Spivak, analyst from DailyFX.
The issue that is the catalyst in the current market is the development of infection with Omicron variants. Cases that continue to increase in the United States have the potential to make the Fed have to think again to tighten monetary policy more aggressively. According to observers, the tendency of the Fed to slightly tighten monetary policy seems to be a bit of relief for gold traders.
Inflation Be the Focus Next Year
Jim Wyckoff from Kitco Metals commented that the main determinant of future gold price movements is the development of inflation data. "The outlook for gold prices in the first quarter of 2022 is quite strong. (However) with inflation as the main driver, which will keep gold prices from rising significantly," Wyckoff said.
Gold prices tend to rise along with rising inflation. However, as a non-yielding asset, gold prices will be pressured by a potential increase in central bank interest rates. In this regard, gold is at risk of being pushed down by the strengthening of the US dollar and bond yields.
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