Price of Gold Fundamental Daily Forecast – Traders Playing Waiting Game with Omicron

Gold futures are trading mostly flat on Tuesday as improved risk sentiment drives down demand for the non-yielding, non-interest bearing asset. A firmer U.S. Dollar is also capping gains as well as a slight rise in U.S. Treasury yields.

Underpinning the market is uncertainty over the potential impact of the Omicron coronavirus variant. Although early reports from South African doctors say that Omicron variant cases are generally mild, global experts are warning it’s still too early to know just how dangerous it is.

White House Chief Medical Advisor Dr. Anthony Fauci said Sunday that the initial data on the variant is “encouraging,” though he cautioned that more information was needed to fully understand it.

At 11:06 GMT, February Comex gold futures are trading $1780.80, up $1.30 or +0.07%. On Monday, the SPDR Gold Shares (GLD) ETF settled at $166.24, down $0.39 or -0.23%.

Global Equity Markets Strengthen Overnight

While gold traders take a “wait and see” approach to Omicron, global stock market investors appear to be looking past the potential impact from the new coronavirus variant.

U.S. stock futures jumped early Tuesday after rebounding from last week’s sell-off during yesterday’s session. Futures on the Dow Jones Industrial Average rose 345 points. S&P 500 futures rose 1.3% and NASDAQ-100 futures were up 1.8%.

On Monday, the blue-chip Dow gained nearly 650 points. The benchmark S&P 500 Index jumped 1.1% with all 11 sectors registering gains. The NASDAQ Composite reversed higher to end the day up 0.9%.

One telltale sign that investors aren’t too worried about Omicron, which doesn’t bode well for higher gold prices – the rally was led by travel-related stocks such as airlines and cruise line operators.

Weaker Safe-Haven Currencies

Another sign pointing toward increasing demand for riskier assets is the stronger U.S. Dollar. Early Tuesday, the dollar is being supported against safe-haven currencies such as the Japanese Yen, hanging on to an overnight jump made with U.S. yields as investors hoped early signs the omicron variant may be mild will be proved correct.

The safe-haven Japanese Yen nursed a 0.6% overnight drop, its largest in two weeks, at 113.47 per dollar. The Swiss Franc, another safe-haven currency, suffered its largest one-day percentage fall in nearly three months on Monday. Dropping through its 200-day and 50-day averages.

Daily Outlook

I’m pointing most of the indicators gold traders should be watching for clues as to the direction of the market’s next major move.

Gold is not going to move higher or lower on its own. It’s going to need a catalyst. Right now the catalysts are bearish. They include rising yields, a stronger U.S. Dollar, and increased risk sentiment.

Fundamentally, the catalyst is likely to be the omicron. When the reports from scientists come out, they are going to show it’s resistant to vaccines or it’s not. I think that is the question gold traders are waiting to be answered. If vaccines work against Omicron then gold prices should fall further. If the virus is resistant to vaccines then gold has a chance to rally.