Daily Market Recap – GOLD Prices consolidates below $1,800 despite uncertainty over Omicron variant

The price of gold has been consolidating below $1,800 since last week after being hurt by a decline in investor inflation expectations. Investors' inflation expectations declined last week as oil prices fell, which hurt the price of gold.

Oil prices have accelerated their losses since Friday after the discovery of the Omicron variant, but the drop in bond yields has offset the negative effect of falling oil prices on gold. The U.S. 2-year rate has fallen 17 basis points since the November 24 peak due to lower expectations of a Fed rate hike, and the 30-year rate has fallen 19 basis points due to lower growth expectations.

The impact of the Omicron variant on the gold price is therefore mixed, as, on the one hand, gold is supported by the fall in bond yields, but on the other hand, it is penalized by the fall in oil prices.

Macroeconomics will therefore continue to play an important role in the evolution of the gold price, especially as traders are awaiting key reports this week such as the monthly employment report and the US ISM indices.

Thursday's OPEC+ meeting could also be a source of volatility for the gold price in the near term. The cartel and its allies may back off and cut production this month in an attempt to boost oil prices. Such an announcement could support oil prices, which would fuel the inflation outlook and support gold.

From a technical perspective, gold last week re-entered the $1,760-$1,814 range in which it has been hovering (mostly) since July and is now marking time in the lower half of that range at about $1,775.

 (Chart Source: Tradingview 30.11.2021)

Gold's exit from this range will set the tempo. A pullback below $1,760 would pave the way for a continuation of the decline to the yearly lows at around $1,675, while a break above the resistance at $1,814 would pave the way for a rebound to the recent high at $1,849, or possibly the June high at $1,916.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.