Dec 01, 2021 03:55AM ET
By: AnalysisWatch
Gold gained some momentum on Wednesday, recovering from its four-week low touched at near $1,770 the previous day. However, the rally lacked follow-through buying or bullish conviction and stalled before the $1,800 mark. The XAU/USD pair has since given back most of its previous day's gains and slipped back below $1,780 in early European trading.
Concerns over the potential economic impact of the discovery of a new, potentially vaccine-resistant coronavirus variant proved to be an important factor in helping secure safe-haven gold. However, global risk sentiment stabilised somewhat as investors preferred to wait and see whether the Omicron variant would ultimately derail the economic recovery. This was reflected by generally positive sentiment in equity markets, which in turn created headwinds for the commodity and limited gains.
Apart from this, increasing bets on more aggressive monetary tightening by the Fed next year also contributed to the gold price's inability to rise significantly. In testimony before the Senate Banking Committee, Fed Chairman Jerome Powell said it was appropriate to consider ending asset purchases, perhaps a few months earlier. Powell added that it was time to get rid of the word "temporary" as the risk of persistent higher inflationary pressures had increased.