Fundamental Daily Gold Price Forecasts
Gold futures are trading near flat at the end of Monday’s session, as traders continue to assess the potential impact of the Omicron coronavirus variant on the U.S. economy. The biggest concern for traders is whether the variant will hurt the U.S. economy enough to curtail plans by Fed members to accelerate the reduction in monetary stimulus. The sooner the Fed withdraws its stimulus, the sooner it can raise interest rates.
As of 8:15 p.m. GMT, February Comex gold futures are trading at $ 1,786.50, down $ 1.60 or -0.09%.
A faster cut and faster rate hike would benefit the US dollar, while dampening demand for dollar denominated gold.
Traders have been anticipating a faster decline for weeks, so any change in the economic outlook due to the variant would encourage investors to lower expectations of a steep decline. This could lead to lower yields, a lower dollar and an increase in foreign demand for gold. The price action would be very similar to what we saw last Friday.
Gold presses after Biden says COVID lockdowns not needed at this time
After a promising start on Monday morning, gold lost some of its strength after President Joe Biden said economic lockdowns in response to the omicron COVID variant were currently out of the question.
“If people are vaccinated and are wearing their masks, there is no need for a lockdown,” Biden said at a press conference Monday. Biden also said there would be no new travel restrictions.
Investors play the waiting game with “Variant of Concern”
The World Health Organization on Friday called the omicron strain a “variant of concern.” As scientists continue to research the variant, the large number of mutations in omicron has sounded the alarm. According to the WHO, preliminary evidence suggests that the strain has an increased risk of reinfection.
The South African doctor who first sounded the alarm about the new variant told the BBC patients were showing “extremely mild” symptoms, although it is too early to determine the behavior of the omicron before it is studied closely.
The rebound in Treasury yields weighs on gold prices
The 10-year Treasury yield rebounded above 1.5% on Monday after a flight to safety on Friday prompted investors to rush into bonds and lower rates.
The benchmark 10-year Treasury bill yield rose 4.6 basis points to 1.531% around 8:00 p.m. GMT. The yield on the 30-year Treasury bill climbed 4.8 basis points to 1.878%.
Short term outlook
Unless there is some breaking news on the omicron, gold traders may start to focus once again on US economic data and the possible faster reduction in stimulus measures. US monetary policy by the Fed.
Pending the release of data later in the week, investors will be watching the November non-farm payrolls report, which is expected to be released on Friday. Both employment and inflation data are used by the Fed to determine its timetable for normalizing monetary policy.
A strong jobs report will likely fuel the resumption of selling pressure on gold prices.