Gold prices fell more than one percent due to rising bond yields, equities rally, and the strengthening of the US dollar tonight.
Gold prices fell in the early American session on Monday (03/January). Spot gold fell 0.3% to $1823.63 an ounce, as did gold futures on the Comex in New York, which fell 0.1% to $1826.40. The chart below also shows XAU/USD's decline of 1.54% to $1801.09.
Risk On Returns, Gold Prices Predicted To Be Gloomy
Market risk appetite has rebounded and is based on market optimism that a lockdown policy is not needed even though cases of Omicron virus infection are still quite high. The reason, the risk of death is considered quite low. US 10-year bond yields rose above 1.5%, stocks opened higher, and the Dollar Index was up by more than half a percent to 96.18.
"We have seen that the US dollar started the year on a strong footing. That put a bit of downward pressure on gold prices which had been creeping up," said independent analyst Ross Norman, quoted by Reuters.
The only ones the gold market can rely on today are physical gold investors. Sales of gold coins and gold bullion are currently still promising. However, Norman doubts that the demand in the physical gold market will be enough to encourage institutional players to invest in ETFs or the futures market. The problem is, at this time there has been a massive liquidation and redemption there.
In 2021, the total decline in gold prices reached 3.6% and became the largest annual decline since 2015. Optimism for the economic recovery that is expected to continue, undermines gold's function as a safe haven asset. Analyst Giovanni Stauvono predicts that this year the price of gold is still less profitable. According to him, the Fed's rate hike and a slowdown in US inflation in the middle of the year could potentially weaken gold prices to $1650 by the end of 2022.
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