Gold rises 1% as virus jitters, lower yields lift demand

[BENGALURU] Gold prices rose nearly 1 per cent on Friday as uncertainty sparked by the Omicron coronavirus variant and a dip in US Treasury yields boosted the safe-haven metal's appeal.

Spot gold was up 0.9 per cent at US$1,785.29 per ounce by 03.12 pm ET (2012 GMT). US gold futures settled 1.2 per cent higher at US$1,783.90.

"Gold is benefiting from a flight-to-safety as investor worries around a faster Federal Reserve taper and the Covid situation as both Delta and Omicron pose a risk to short-term growth outlook," Edward Moya, senior market analyst at brokerage Oanda.

"Gold's end of week performance is significant as it coincides with curve flattening that includes high expectations for a faster Fed taper."

Sentiment in wider financial markets remained weak, with the Nasdaq tumbling over 2 per cent, as mixed US jobs data and fears around the Omicron coronavirus variant weighed.

Further lending support to gold, the US 10-year bond yield dropped below 1.4 per cent for the first time since September, reducing the opportunity cost of holding non-interest bearing gold.

However, gold was still on track for its third consecutive weekly loss, down 0.4 per cent, as Fed officials struck a hawkish tone on stimulus tapering and interest rates.

Data on Friday showed US employment growth slowed considerably in November, but the unemployment rate plunged to a 21-month low of 4.2 per cent, suggesting the labor market was rapidly tightening.

Fed policymakers look likely to accelerate the winddown of their bond-buying program when they meet later this month as they respond to a tightening labor market and move to open the door to earlier rate hikes than they had projected.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Elsewhere, spot silver gained 0.6 per cent to US$22.51 per ounce.

Platinum fell 1.1 per cent to US$927.07, while palladium gained 1.2 per cent to US$1,802.51.

REUTERS