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Gold had a rollercoaster week, starting strong, dropping sharply, and then rising again as the emergence of the new Omicron Covid-19 variant sparked a sudden upturn in the price on Friday. Investors flocked to gold as a safe-haven due to fears that the new virus variant could derail economic recovery. But was this initial panic short-lived?

Gold’s Rollercoaster Week

Gold opened last week on a high of around £1376, before dropping sharply to £1348 later that same day. Monday saw the US Federal Reserve’s decision to address inflation concerns by accelerating the withdrawal of stimulus packages.

The price then experienced a few small ups-and-downs through mid-week, hovering gently between the £1336 and £1344 mark.

Friday saw the yellow metal start at around £1347 in the early hours of the morning. However, news of the emergence of the new highly infectious Omicron virus variant from South Africa pushed the price sharply up to £1361 around midday. Markets were rocked, and the Bloomberg Commodity Spot Index experienced its largest drop since June as the new variant raised concerns that lockdowns could make a return and that the global economic recovery could be derailed, sparking a spike in the buying of gold for safe-haven reasons.

However, gold’s rollercoaster ride wasn’t over yet, as it then saw a sharp drop back down to £1344 later in the same day.

Up Or Down? What’s Next?

The World Health Organisation have dubbed this new virus variant ‘Omicron’, which is the fifteenth letter of the Greek alphabet. The thirteenth coronavirus variant, Omicron initially caused panic amongst the markets at the end last week, due to reports of its highly infectious nature.

Analysts initially may have expected gold to stay high following the renewed virus concerns. However, there is some renewed optimism that the effects of this new variant may be mild, possibly making gold’s rise in momentum short-lived. The US’s government’s move on the accelerated withdrawal of stimulus packages may also continue to put downward pressure on the yellow metal.

However, investors should closely observe the developing situation on the omicron variant, how it spreads, and the effect it may have on countries restrictions. Facemasks and travel restrictions have already been imposed again this week, so further restrictions and lockdowns may not be completely off the cards in the near future. The heavy impact of these stricter restrictions would most probably fuel the demand for gold once more as a safe-haven asset.

It looks like gold’s rollercoaster ride may not be over yet.

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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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