Gold price found some support after US manufacturers posted slower-than-expected growth in December, although Treasury yields were strong to make up for just over half of those lost the day before.
“Gold price gains will be limited by developments in the US”
“The chaos caused by the rapid spread of the Omicron variant came too late to have much impact on December payrolls, which we estimate is up by a healthy 350,000,” Michael Pearce, senior US economist at Capital Economics, wrote in a note Tuesday. But the economist reminds that many people being asked to stay in isolation could cause a significant drop in January payrolls.
For now, some analysts say the nugget continues to attract investment interest from those looking to hedge against the potential impact of the Omicron variant on parts of the world. In a research report Tuesday, ActivTrades senior analyst Ricardo Evangelista comments:
The price of gold climbed on Tuesday as investors sought the safety of the precious metal as some countries tightened measures to contain the rise in Omicron cases. Any gains for gold will be limited by developments in the United States, where the dollar continues to strengthen thanks to higher Treasury yields and markets are firmly anchored in the belief that the Fed will raise rates at least three times in 2022.
Minneapolis Fed Chairman Neel Kashkari said on Tuesday that inflation has risen more than he expected and is taking longer. Also, in a separate article published, Neel Kashkari noted at the December FOMC meeting that he plans two rate hikes in 2022.
Analysts from Sevens Report Research wrote in a news release on Tuesday that a sharp rise in Treasury yields that began to push real interest rates was "a huge risk to the gold market." For now, however, they noted that the short-term rally for gold remains “solid” with support between $1,775 and $1,800.
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