Gold Steady Below $1,788: Bulls and Bears Continue to play Tag

The European Central Bank will halve the number of assets it purchases each April. Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding non-interest-bearing bullion. On Monday, the US Treasury yield on the benchmark 10-year note, dropped sharply, all the way down to 1.41%, which added some strength to the yellow metal. The US Dollar Index, which measures the value of the greenback against a basket of six major currencies, surged to 96.44 on Monday, capping further gains in the yellow metal. However, gold drew strength from the high inflation figures released the previous week. US consumer prices rose further in November, as the cost of goods and services rose broadly, amid supply constraints, which led to the largest annual gain since 1982.

Gold gathered further strength from its safe-haven status after the World Health Organization updated its warning, saying that the Omicron coronavirus variant has been reported in more than 60 countries, and that it poses a very high global risk, with some evidence that it evades vaccine protection. However, clinical data on its severity remains limited. The uncertainty surrounding Omicron and its potential threat to the economic recovery, due to its alleged high immunity to vaccines increased market concern and raised the safe-haven appeal of gold.