Gold prices edged higher on Monday as concerns over the impact of the Omicron coronavirus variant offset a stronger dollar, with investors assessing whether the emergence of the variant could change the US Federal Reserve’s hawkish stance.
Spot gold rose 0.2 per cent to $1,794.87 per ounce by 0646 GMT (10.46am UAE time), while US gold futures advanced 0.5 per cent to $1,794.20.
In Dubai, 24-carat gold was retailing at Dh217.25 per gram, while 22-carat gold was at Dh204 per gram.
With new cases of the Omicron variant found in the Netherlands, Denmark and Australia, more countries imposed travel restrictions to try to seal themselves off.
“Given the uncertainty around whether this new variant is more dangerous than the Delta variant, gold’s downside should be protected,” Harshal Barot, a senior research consultant for South Asia at Metals Focus, said, adding that it could trade between $1,780 and $1,830.
Barot also said while it was too soon to gauge if virus concerns have eased rate hike expectations, there is an upside risk for gold that the variant eventually leads the Fed to scale back on its stimulus tapering and rate rise plans.
Atlanta US Fed President Raphael Bostic was the latest among a growing number of policymakers to say he remained open to accelerating the pace of the central bank’s bond taper.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest.
Capping gold’s gains was a stronger dollar which increased bullion’s cost to buyers holding other currencies.
Jeffrey Halley, senior market analyst at OANDA, partly attributed gold’s retreat from Friday’s peak to the steep decline in platinum and palladium, and said gold’s inability to rise substantially from their recovery on Monday was a negative factor for gold’s price action, potentially pushing it lower.