Spot gold is under pressure, the US index stands above 96, and Omicron is difficult to stop FED to accelerate the water collection

On Monday (December 6), spot gold was under pressure, and the us dollar index was expected to stand above the 96 mark. Investors assessed the potential impact of the Omicron variant on the economy as it emerges in more countries, while keeping a close eye on U.S. inflation data that will come out later this week and could shape the course of the Fed's interest rate policy.

At 20:39 Beijing time, spot gold fell 0.32% to $1777.56/oz; the comex gold main contract fell 0.31% to $1778.3/oz; and the dollar index rose 0.04% to 96.177.

Omicron probably doesn't have to worry that much

Scientists have yet to determine the severity of the Omicron variant that is blocking the cause of the disease. The strain was first discovered in southern Africa last month, and more than 30 countries have since reported the resulting disease, fearing it could be more resistant to existing vaccines. But South Africa has recently delivered reassuring news.

Ntsakisi Maluleke, a public health expert in Gauteng province in South Africa, said last weekend that despite the high hospitalization rate of children, the cases caused by the Omicron new crown strain have only mild symptoms, and the public does not need to feel new panic about the strain, "The occupancy rate of beds for new coronavirus patients in Gauteng province is only about 13%. ”

The South African Medical Research Council published an article based on early observations from the Steve Biko/Tswane District Hospital complex in the capital Pretoria over the past two weeks. Most patients in the COVID-19 ward of the hospital complex do not rely on oxygen for breathing, and they initially come to the hospital for other diseases, which means that it is accidental that they tested positive for covid-19. There have been no COVID-19-related deaths among the 34 hospitalized patients in the pediatric COVID-19 ward in the past two weeks.

At least 16 states in the United States have reported cases of Omicron infection. Many cases have been fully vaccinated and their symptoms are mild, although some patients have not been reported for booster injections. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN: "So far, it doesn't look like it's very serious. Although he added that it is too early to draw definitive conclusions and more research is needed.

Goldman Sachs analyst Joseph Briggs said in a note that the Omicron variant could slow the pace of economic restart, but is expected to have "only a modest drag" on service spending, "While many questions remain unanswered, what we now think is most likely to be a mild negative scenario in which the virus spreads faster but immune protection against severe illness is only slightly weakened." ”

As the analysis of relevant research is further developed, the future direction of the new crown epidemic will become clearer. If data on the Omicron variant virus confirm its mild severity, then the Fed's announcement of accelerated tapering stimulus seems certain, so gold prices could remain under pressure, likely to see as low as $1720 next week.

The November non-farm payrolls could not shake the Fed's resolve

U.S. non-farm payrolls rose 210,000 jobs in November, less than half what economists expected. But average hourly earnings rose 4.8 percent in November from a year earlier, the unemployment rate fell to 4.2 percent, and the number of people entering the labor market was the highest in 13 months. Analysts believe that job growth is tepid, does not fully reflect the strength of the labor market, and may be revised up in the future. The November non-farm payrolls report did little to shake market expectations that the Fed would speed up the process of scaling back stimulus measures and start raising interest rates after that.

The November inflation data, to be released later this week, could reinforce these expectations. U.S. consumer prices rose 6.2 percent in October from a year earlier, the biggest year-over-year increase in 31 years, more than double the Fed's 2 percent target, and the risk that inflation won't subside as quickly as policymakers hope is rising as supply chains are blocked. Fed Chairman Jerome Powell said last week that "temporary" no longer accurately describes high inflation and that the Fed could debate accelerating bond buying in December.

Mizuho Bank analysts said in the research report: "Fed officials, including Chairman Powell, have become more outspoken about the risks posed by persistently higher inflation, and with it the implicit assumption that the timeline for ending asset purchases and subsequently raising policy rates is being set faster." Markets are increasingly expectant, with the Fed announcing at its December meeting that it will accelerate its debt-buying cuts. ”

Francesco Pesole, FX strategist at ING Bank, said: "After the market received the latest statement from [Fed Chairman] Powell last week, the US dollar will confirm the prospect of the Fed planning to accelerate the pace of bond purchases. Given the divergence in policy expectations across the Atlantic, the dollar is likely to appreciate further against European currencies. ”

Will there be a rate hike in the first half of next year?

Since March 2020, the Fed has kept interest rates close to zero. In November, it began reducing its monthly bond purchases by $120 billion, at its pace and fully closing by June 2022. But inflation is likely to remain at troubling highs in 2022. The Fed could end its bond purchases months early.

Barclays analysts wrote in a note that "our view is that the Fed will see the economy as close to full employment," adding that they expect the Fed not only to accelerate the pace of debt-buying in December, but also to start raising interest rates in March.

The Fed's latest "Beige Book" survey shows that businesses are coping with rising inflation and labor shortages. Another strong inflation data could reinforce expectations that the Fed will become more aggressive, putting more pressure on markets that were already freaked out by Omicron. The Fed will tighten policy faster than most developed countries, and the dollar will once again show its strength.

Spot gold is still looking down at $1731

On the daily chart, gold prices are in the downward ((Z)) wave opened since $1877, retracing the 382.% target of $1787 and falling again, and the future market is expected to further explore the 61.8% target of $1731. The ((Z)) wave is a sub-wave of the adjusted IV wave that has been opened since $2075.

This article originated from Huitong Network