Time to buy: Gold set for biggest weekly fall since late-November, to get costlier soon
Gold steadied on Friday, ahead of US jobs data due later in the day, although the metal was set for its biggest weekly drop since late-November, weighed by firmer bond yields as traders braced for sooner rate hikes by the Federal Reserve.
Spot gold was down 0.1 per cent at $1,790 per ounce after two straight sessions of falls, bringing its weekly fall to about 2 per cent. US gold futures were up 0.2 per cent to $1,792.60.
In the UAE, 24-karat gold price is likely to trade between Dh213 and Dh220 in the days ahead. Gold prices in the Emirates, which fell about Dh3 per gram on Thursday, rose about Dh1 on Friday morning.
The price of 24-karat gold in the UAE was at Dh217.25 per gram on Friday, up from previous day’s Dh216.50, but still down Dh4 from Wednesday’s Dh221.25. The price of 22-karat was at Dh204.0, 21-karat at Dh194.75 and 18-karat at Dh166.75. To monitor gold prices in the UAE, click here.
Omicron uncertainty to push prices up
The World Health Organisation (WHO) said the Omicron variant cannot be considered ‘mild’, while stronger yields capped bullion’s gains.
The more infectious Omicron variant of COVID-19 appears to produce less severe disease than the globally dominant Delta strain, but it should not be categorised as “mild”, World Health Organization (WHO) officials said on Thursday.
Alarmed by the persistence of uncomfortably high inflation, even the most dovish of US central bankers now agree that they will need to tighten policy this year.
“Markets are increasingly pricing in an aggressive Fed…the whole prospect of Fed trying to control an inflation outbreak is obviously lifting yields,” IG Markets analyst Kyle Rodda said, adding that bullion was losing some of its appeal on that basis.
Traders are currently anticipating a greater than 70 per cent chance for a rate hike of at least 25 basis points at the March Fed meeting, according to the CME FedWatch Tool.
Gold is considered as a hedge against higher inflation, but the metal is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion.
Safe havens get safer
Benchmark US 10-year Treasury yields rose to the strongest level since March 2021, while 10-year TIPS yields hit June 2021 highs. Higher yields raise the opportunity cost of holding gold.
Bullion is considered an inflationary hedge, but the metal is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.
Spot gold may stabilise around a support at $1,782 per ounce and rise into a range of $1,801-$1,815, according to Reuters’ technical analyst Wang Tao.
Looking ahead, the US non-farm payrolls report due at 1330 GMT is on investors’ radar.
“A number above 550,000 or 600,000 will reinforce the Fed tightening faster narrative and weigh on gold. A number lower than 250,000 will ease those concerns and provide some support for gold,” said Jeffrey Halley, a senior market analyst at OANDA.
Spot silver was little changed at $22.14 an ounce, platinum rose 0.2 per cent to $966.50, and palladium inched down 0.1 per cent to $1,872.02.