FX.co ★ New strain of coronavirus takes shine off gold

The new COVID-19 strain gave a small boost to gold at the end of last week. However, scientists cannot say exactly how dangerous it is. As a result, the metal lost its luster with traders again

Gold started the current week with a fall. Panic over the coronavirus that gripped the markets last Friday eased slightly. Investors breathed a sigh of relief after hearing the comments of representatives of the World Health Organization.

WHO has not confirmed yet the information that patients infected with the omicron strain have a more severe course of the disease compared to those suffering from other COVID-19 variants. It is also unclear whether the new version of the coronavirus is more contagious than the previous ones.

Virologists also do not have an answer. For this reason, it is now difficult to predict what impact it may have on the global economy. However, the stock market may benefit from the uncertainty around the new strain.

At the end of last week, global stock exchanges fell on reports of a new strain of coronavirus, which has a large number of mutations, high transmissibility, and resistance to vaccines.

Investors were scared by the risk of another lockdown. They again shifted their attention to safe-haven assets. As a result, the price of gold reached an intraday high of $1,816.30 during Friday trading.

On Monday, when the panic subdued a little, the situation changed. Traders' attention turned back to stocks. Thus, the main US stock indices showed a positive dynamic. The Dow rose by 0.68%, the S&P 500 grew by 1.32%, and the NASDAQ Composite climbed by 1.88%.

Gold dropped following an increase in the stock market. Gold futures for February fell by 0.2%, or $2.90, to $1,785.20 yesterday. Meanwhile, gold futures for December sank by 0.2% or to $3.20. As a result, the gold price was settled at $1,782.30.

Gold has finished the fourth session in a row below the psychologically important level of $1,800. A strong US dollar does not allow gold to rise above this key mark. Yesterday, for example, the US currency index rose by 0.1% and reached 96.45. The greenback also strengthened after the panic over the new strain ebbed away.

At the end of last week, the US dollar grew by 0.1%, while gold prices collapsed by 3.6%. The greenback was supported by the re-election of Fed Chairman Jerome Powell. Investors expect that in the face of rising inflation, he will accelerate the reduction of asset purchases that began in November in order to start raising interest rates faster.

Analysts draw attention to the fact that the comments of officials of the US central bank regarding the Fed's further course may have a huge impact on gold in the short term. In addition, gold will be vulnerable to the news on the omicron strain.

"Only a global lockdown caused by the omicron variant will impact precious metals, stocks, and bonds", Chintan Karnani, a Chief Market Analyst at Insignia Consultants, said. If there are any hints of a complete lockdown in Europe, the UK, and North America, gold is likely to break through the $1,900 level and rise to almost $2,000, he added.

Omicron will continue to adversely affect the market sentiment until there is more information about it. Therefore, uncertainty will persist in the gold market, triggering price fluctuations.