Gold steady as hawkish Fed stance offsets Omicron worries

[BENGALURU] Gold prices were little changed on Thursday (Jan 6), as a surge in US Treasury yields following hawkish meeting minutes released by the Federal Reserve offset the precious metal's safe-haven demand amid rising cases of the Omicron coronavirus variant.

Spot gold was little changed at US$1,810.59 per ounce by 1.42 am GMT. US gold futures fell 0.8 per cent to US$1,810.

Fed officials said the "very tight" US labour market might warrant raising rates sooner than expected, as well as reducing the bank's overall asset holdings to tame high inflation, minutes of their Dec 14-15 policy meeting showed.

Benchmark US 10-year Treasury yields rose to its strongest level since April 2021, while 30-year yields climbed to more than 2-month highs. Higher yields raise the opportunity cost of holding gold.

Some investors view gold 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.

Futures on the federal funds rate on Wednesday (Jan 5) have priced in a roughly 80 per cent chance of a quarter-percentage-point rate hike by the Fed at its March meeting.

Making gold less appealing for other currency holders, the dollar cut losses after the Fed minutes.

The rolling 7-day average number of new Covid-19 cases in the United States hit 540,000, a new high for an 8th consecutive day on Tuesday (Jan 4). Hospitalisations of Covid-19 patients in the country have risen 45 per cent in the past 7 days and stand at over 111,000, a figure not seen since January 2021.

Spot silver shed 0.1 per cent to US$22.75 an ounce, platinum fell 0.2 per cent to US$980.53, and palladium remained unchanged at US$1,863.69.

REUTERS