Metals Turmoil Cools After Wild Friday as Omicron Fears Ease
Gold fell after some concerns over the omicron coronavirus strain eased, boosting risk appetite even as the WHO urged caution.
(Bloomberg) -- Gold fell and industrial materials rebounded after concerns over the omicron coronavirus strain eased, boosting risk appetite even as the World Health Organization urged caution.
Markets were roiled on Friday, with the Bloomberg Commodity Spot Index dropping the most since June, as the emergence of the new Covid-19 variant raised concerns that the global economic recovery would be derailed. But some calm returned on Monday after two South African health experts suggested the strain is presenting with mild symptoms so far.
U.S. equity futures climbed with crude oil. Nickel rose more than 2% to lead a rally across base metals, while iron ore in Singapore jumped more than 9%.
“Panic over the omicron variant has been easing over the weekend,” Jinrui Futures Co. said in a note on Monday. If omicron’s death rate and the severity of its symptoms is limited, “then the impact on capital markets will be controllable,” it said.
Still, investors remained wary after the World Health Organization urged caution, saying it will take time to assess the new strain. A raft of flight bans and more wide-ranging measures aimed at reducing omicron’s spread have caused havoc for airlines, passengers and some businesses.
“Overall we expect a period of heightened volatility, even with industrial metals,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “The virus’ actual impact is not fully known at this point -- depending on how the situation evolves, we may see either a rebound or a continued selling off. More clarity, we expect, will arrive after two weeks.”
Gold, a traditional haven during times of uncertainty, pared initial losses to trade 0.5% lower at $1,793.88 an ounce by 7:05 a.m. in London. Comex futures were 0.4% higher.
Bullion has erased most of its November rally and is almost back to where it started the month as investors weigh whether the Federal Reserve will remove policy support at a faster pace to keep inflation in check. Fed Bank of Atlanta President Raphael Bostic played down the risk of the new variant to the U.S. economy.
“The market remains wary of the impact of the Fed’s increasingly hawkish stance on interest rates, despite virus fears,” OCBC’s Lee said. “Short term, we expect more funds to flow into haven assets like gold, but long-term we expect global rate normalization to keep a lid on gold’s prices.”
Platinum rose 1.4%, while silver advanced 0.9% and palladium climbed 1.4%.
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With assistance from Bloomberg