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Gold experienced another up-and-down week last week, eventually ending up at a similar price to the prior week’s close. Previously, precious metals had experienced a lift after news of the new Omicron variant of Covid-19 broke. However, this rise looked to be short-lived, and gold appears to have since been given a booster shot, protecting it from the new variant, in comparison to its reaction to the original Alpha strain.

Has gold become resistant to the virus?

Gold’s resistance

Last week, we spoke about gold’s ‘rollercoaster week’ as it moved between monthly lows and then signs of recovery. Many news reports worldwide suggested that the new Omicron variant of Covid appeared to be more infectious than any other strain, and may have some resistance to vaccines, leading to investors flocking to gold as a safe-haven, due to fears that this new variant could derail the economic recovery.

The driving force behind almost all global markets was this possible rise in coronavirus infection rates due to Omicron, however this was short-lived. Gold appears to have virtually ignored the new strain, in comparison to its reaction to the initial outbreak in 2020 and the more transmissible Delta mutation, which still appears to be driving new infections. But what is the reason for gold’s resistance?

There are already many cases of the new Omicron strain showing up around the world, showing it is (as expected) spreading quickly, yet indications are that it may not be as deadly as those previous. With reports of lighter symptoms, Omicron may not have the

devastating effect on public health and the economy that its previous mutations had, and this could be why gold may appear to be a little more resistant.

What’s next for gold?

Last week saw coronavirus infection rates rise, and what this may do to the prospects of the global economic recovery is uncertain. Many parts of Europe have seen some strong government regulations come into force already, and the UK has imposed the return of facemasks and travel restrictions, so further restrictions and lockdowns may not be completely off the cards in the near future, whether due to the Delta or Omicron variants.

Infections are also building in the US, which could hugely affect economic growth. The result of this month’s FOMC (Federal Open Market Committee) meeting will be one to watch, as the Fed could yet delay stimulus tapering and the rising of interest rates, despite America’s central bank having a change of heart on inflation, declaring it was no longer ‘transitory’.

Last week also saw a swing in the price of Bitcoin, which experienced a large fall on Friday. The continuation of this, could possibly bring investors back to gold.

Ok, so gold may not be swimming in the crazily high waters it was during the summer of 2020, but it is still sitting pretty. Gold will always hold value. When comparing prices over long periods of time, it is gold that becomes the point of reference. A timeless store of value you can see and touch, a safe-haven asset in times of uncertainty - and investors are holding on. Gold bides its time, still.

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.

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1 Comment(s)

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Thank you. It does appear to be a buying opportunity and it will inevitably recover just knowing this provides some comfort. If the everything bubble pops then the dollar and gold are the only places left. Keep up the good work. I am confident of this and believe inflation is not derisory it is fairly permanent thanks to lockdowns.

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