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Gold contracts Monday morning were trading lower, with the precious metal being hit by the prospects for higher interest rates — something that was hurting appetite for equities and precious metals alike in the short term.
“The United States’ economy is expected to slow down in the first quarter of 2022, causing stock markets to correct and investors to shift their capital out of equity markets and into gold,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a research note.
“However, as the Fed moves to raise interest rates, the outlook for gold is likely to be bearish,” wrote Aslam.
On top of that, Goldman Sachs cut its U.S. growth forecast again, citing Democratic Sen. Joe Manchin’s assertion that he won’t back President Joe Biden’s key $2 trillion spending bill. Manchin told Fox News Sunday that, after five-and-a-half months of talks within his own party, he couldn’t “vote to continue with this piece of legislation. I just can’t. I’ve tried everything humanly possible. I can’t get there.” His vote is crucial in a 50-50 split Senate.
Despite the challenges that the economy may face in this wave of infections, central bankers are expected to be more aggressive about lifting interest rates, which currently stand at a range between 0% and 0.25%, to combat inflation that has been rising on the back of supply-chain bottlenecks and growing demand for goods and services in the uneven economic recovery from the pandemic.
Against that backdrop, February gold
GCG22,
was trading $7.90, or 0.4%, to reach $1,797 an ounce, following a 1.1% decline for the most-active contract.
Meanwhile, March silver
SIH22,
was trading 24 cents, or 1.1%, lower to reach $22.29 an ounce, after gold’s sister metal put in a 1.5% weekly gain on Friday.
A number of countries have already imposed fresh restrictions due to the spread of the omicron variant of coronavirus that causes COVID-19 as the holiday season gets under fuller swing. The Netherlands on Sunday reimposed a lockdown, with all nonessential shops, bars and restaurants closed until mid-January. Irish Prime Minister Micheál Martin also announced new restrictions, and President Biden is expected to deliver a Tuesday update on the fight against COVID-19, The Wall Street Journal reported.
