Gold contracts closed lower Monday, with the precious metal hit by the prospects for higher interest rates—something that was hurting appetite for equities and precious metals alike, in the short term.
Market participants also said that part of the downside for precious metals related to selling amid a lack of liquidity in thinly traded holiday markets, rather than purely a more bearish stance on the yellow metal.
“The lack of upside impetus also suggests that a lot of today’s risk off moves are being driven by a lack of liquidity, more than any undue pessimism about future economic prospects,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a daily note.
Many global markets will be closed on Friday in observance of Christmas.
The declines for gold came even as 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. The West Virginia senator’s vote is crucial in a 50-50 split Senate.
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“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.
Despite the challenges that the economy may face in this wave of COVID-19 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, -0.65% settled $ 10.30, or 0.6%, lower at $ 1,796.40 an ounce, following a 1.1% decline for the most-active contract.
Meanwhile, March silver SIH22, -1.01% lost 24.2 cents, or 1.1%, to settle at $ 22.291 an ounce, after gold’s sister metal put in a 1.5% weekly gain on Friday.
The Dow Jones Industrial Average DJIA, -1.40%, the S&P 500 index SPX, -1.31% and the Nasdaq Composite Index COMP, -1.36% were also facing heavy selling on Monday.
A number of countries 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.
Elsewhere on Comex, copper for March delivery HGH22, +0.12% lost less than a penny, or 0.03%, to settle at $ 4.2935 a pound, after, ending around 0.2% higher for the week on Friday.
January platinum PLF22, -0.78% lost $ 8.10, or 0.9%, to close at $ 926.40 an ounce, following a gain of 30 cents for all of last week. March palladium PAH22, -2.48% shed $ 38.90, or 2.1%, to settle at $ 1,745.90 an ounce, after booking a 2% weekly rise on Friday.