Gold jumps on virus news but still down on the week

Gold steadied last Friday after a jump prompted by a rush into safe-haven assets amid concerns over a new coronavirus variant. However, prices were still down 3% from the week before because of earlier sell-offs by investors worried about the prospect of higher interest rates.

The afternoon fixing on Friday in London was $1,800.80 an ounce, compared with $1,861.10 a week earlier. Thai selling prices were quoted at 28,650 baht per baht-weight (15.2 grammes), down 100 baht from the previous week.

Authorities globally reacted with alarm to the potentially serious Omicron virus variant, with the EU and Britain among those tightening border controls, triggering a selloff across markets that seeped into oil and other precious metals.

But after the rally due to bullion’s safe-haven appeal, the overall bearish turn in commodities eventually claimed gold as well, said Jim Wyckoff, senior analyst at Kitco Metals, adding that the market reaction was probably overblown.

Supporting gold was a sharp pullback in the dollar and lower US Treasury yields.

“The gold price should remain supported in this environment and the topic of (Fed) tapering should take a back seat for the time being,” said Alexander Zumpfe, a precious metals dealer at Heraeus.

Investors’ main concern is that high US inflation could cause the Federal Reserve to start raising rates soon, raising the opportunity cost of holding non-interest-bearing bullion.

Physical gold demand picked up in major Asian hubs, helped by a retreat in prices, with dealers in India prepared for a spurt in buying as the wedding season gathers pace.

With a correction in prices during the first half of the week, “jewellers have been making purchases at lower levels as they are witnessing healthy retail demand for weddings”, said a Mumbai-based bullion dealer with a private bank.

In China, a report showed that monthly net gold imports via Hong Kong jumped 56% in October to the highest since June 2018.