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Gold price rebounds, fights off hawkish comments from Powell

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Gold bounced back from a three-week low as traders continue to weigh the spread of the omicron coronavirus variant against the latest comments by Federal Reserve Chair Jerome Powell on the need to curb inflation.

Spot gold rose 0.5% to $1,784.87/oz by 12:10 p.m. ET, erasing most of its losses from Tuesday following Powell’s remarks that the Fed may consider ending pandemic support at a faster pace than expected. US gold futures were up 0.6% to $1,787.40/oz in New York.

[Click here for an interactive chart of gold prices]

Gold’s recovery comes alongside a sharp rebound in stock markets as investors used the dip in prices to bet the latest covid-19 variant would not derail the economic recovery. This suggests that safe-haven inflows into bullion might not be as strong as anticipated.

Gold posted a marginal loss last month as investors weighed the prospects of the Fed dialing back on stimulus amid elevated consumer prices, alongside uncertainty surrounding the omicron variant’s impact on the global recovery. The US central bank is currently scheduled to complete its asset-purchase program in mid-2022.

Virus-related concerns are offering gold “limited support,” Ricardo Evangelista, senior analyst at ActivTrades, said in a Reuters report, with bullion also benefiting from “the usual flight to safe havens that normally follows the levels of volatility registered over the last few session.”

While gold may benefit as questions remain over the new variant, the main narrative remains focused on what the Fed will do, and bullion could face pressure if Friday’s US employment data confirms the strengthening of the labour market, Evangelista added.

There are “polarizing views” on gold’s future after Powell’s comments, StoneX analyst Rhona O’Connell told Bloomberg, though she added investors should remember that inflation-adjusted yields are still in negative territory, which is positive for gold as it generates no interest.

A soft dollar also helped boost gold’s appeal to foreign investors. The greenback fell to a nearly two-week low after ISM survey data for November showed new orders improving while price pressures remain elevated.

(With files from Bloomberg and Reuters)

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