Gold bounces off $1,795 support – Buckle up for a long-term signal

During early trading hours on Friday, gold reached its highest price since November 26, but it started losing its earlier gains and turned flat for the day after facing selling pressure in the late trading hours, amid the rising strength of the US dollar. The US dollar index, which measures the greenback’s value against a basket of six major currencies, reversed course and turned green on Friday, recovering most of its losses of the previous day, and reaching a price of 96.69. The Treasury yield on the 10-year benchmark note maintained its bearish trend and fell to its lowest level since December 6, at 1.37%. On Friday, Fed Governor Christopher Waller said that the Fed might increase interest rates right after the bank concludes its asset purchases early next year, given his expectations regarding inflation and labor market conditions. Moreover, he supports the decision to accelerate the pace of the bond tapering, come January, as it will provide flexibility for other adjustments to monetary policy as early as the spring, in order to accommodate changes in terms of the economic outlook. These comments by Waller added further strength to the already rising US dollar and pushed it higher.

On the other hand, the gains in the yellow metal could also be attributed to the increased concerns raised by the rapidly spreading Omicron variant of the coronavirus. The safe-haven demand for precious metals set in on the market after New York state announced a record number of cases for the second day in a row, with about 22,000 people testing positive. Ahead of the holidays, restaurants and bars were closing their doors, despite the no-restriction announcement from the government, amid fears of the spread of the new Covid variant. On Friday, Britain reported about 25,000 confirmed cases of coronavirus, which was 10,000 cases more than the previous day.

Furthermore, on Friday, the Group of Seven nations (G7) said that the Omicron variant of the coronavirus was the biggest threat to global public health, as it continues to spread rapidly throughout the world, having already been reported in at least 77 countries. The rising number of warnings against the Omicron variant and its continuous spread worldwide raised the safe-haven appeal in the market and turned gold higher for the day.