Gold edges higher as WHO categorises Omicron as not 'mild'

[BENGALURU] Gold inched up on Friday (Jan 7), hovering close to a 2-week low hit in the previous session, after the chief of the World Health Organization (WHO) said the Omicron variant cannot be considered "mild", while stronger yields capped bullion's gains.

Spot gold was up 0.2 per cent to US$1,791.73 per ounce by 1.00 am GMT. US gold futures was up 0.1 per cent to US$1,791.70.

The precious metal was all set for its worst weekly fall since late November, down about 2 per cent.

The more infectious Omicron variant of Covid-19 appears to produce less severe disease than the globally dominant Delta strain, but it should not be categorised as "mild", WHO officials said on Thursday.

Alarmed by the persistence of uncomfortably high inflation, even the most dovish of US central bankers now agree that they will need to tighten policy this year.

Traders are currently anticipating a greater than 70 per cent chance for a rate hike of at least 25 basis points at the March Fed meeting, according to the CME FedWatch Tool.

Benchmark US 10-year Treasury yields rose to its strongest level since March 2021, while 10-year TIPS yields hit highest since June 2021. Higher yields raise the opportunity cost of holding gold.

Gold is considered as a hedge against higher inflation, but the metal is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion.

Spot silver was flat at US$22.16 an ounce, platinum rose 0.2 per cent to US$966.85, and palladium inched up 0.1 per cent to US$1,875.78.

REUTERS