Gold rises 1% as virus jitters, lower yields lift demand

Gold rises 1% as virus jitters, lower yields lift demand

Close up image of assorted gold ingots and gold coins.

Anthony Bradshaw | Getty Images

Gold prices rose nearly 1% on Friday as uncertainty sparked by the Omicron coronavirus variant and a dip in U.S. Treasury yields boosted the safe-haven metal’s appeal.

Spot gold was up 0.9% at $1,785.29 per ounce by 03:12 p.m. ET (2012 GMT). U.S. gold futures settled 1.2% higher at $1,783.90.

“Gold is benefiting from a flight-to-safety as investor worries around a faster Federal Reserve taper and the COVID situation as both Delta and Omicron pose a risk to short-term growth outlook,” Edward Moya, senior market analyst at brokerage OANDA.

“Gold’s end of week performance is significant as it coincides with curve flattening that includes high expectations for a faster Fed taper.”

Sentiment in wider financial markets remained weak, with the Nasdaq tumbling over 2%, as mixed U.S. jobs data and fears around the Omicron coronavirus variant weighed.

Further lending support to gold, the U.S. 10-year bond yield dropped below 1.4% for the first time since September, reducing the opportunity cost of holding non-interest bearing gold.

However, gold was still on track for its third consecutive weekly loss, down 0.4%, as Fed officials struck a hawkish tone on stimulus tapering and interest rates. 

Data on Friday showed U.S. employment growth slowed considerably in November, but the unemployment rate plunged to a 21-month low of 4.2%, suggesting the labor market was rapidly tightening.

Fed policymakers look likely to accelerate the winddown of their bond-buying program when they meet later this month as they respond to a tightening labor market and move to open the door to earlier rate hikes than they had projected. 

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Elsewhere, spot silver gained 0.6% to $22.51 per ounce.

Platinum fell 1.1% to $927.07, while palladium gained 1.2% to $1,802.51.

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