Spot gold rises as dollar erases gains and US factory gauge slips

(Bloomberg) – Gold rebounded as the dollar slashed gains and the U.S. manufacturing gauge fell short of economists’ expectations.

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A dollar index dropped initial gains of as much as 0.3%, boosting bullion’s appeal as an alternative asset. The Institute for Supply Management’s December factory activity measure fell to the lowest level since January 2021, data showed Tuesday.

Gold got off to a chaotic start to 2022, posting its biggest drop in six weeks on the first trading day of the year amid rising Treasury yields. As the bullion fell below its 50-day moving average on Monday, uncertainty over the virus could signal further monetary policy accommodation, supporting the metal, said Bart Melek, global chief strategy officer. commodities at TD Securities.

The spread of the virus threatens both demand and supply forces, which could affect the growth outlook for the United States, suggesting that the Fed may want to remain cautious until the omicron wave s ‘soothe this winter,’ Melek said in a note.

Meanwhile, inflationary pressures in the U.S. manufacturing sector have shown signs of abating at the end of 2021, even as producers continue to grapple with high prices and long delivery times.

The Institute for Supply Management’s gauges for supplier deliveries and prices paid for materials both fell in December to their lowest levels in more than a year, according to the report released on Tuesday. This brought the overall measure of the activity of the group’s factories down to the lowest since January 2021.

Signs of cooling cost pressures have shown “that there is less reason for the Fed to be aggressive with prices falling and trending below market expectations,” which is favorable for the Fed. gold, said Melek of TD Securities.

Traders are also monitoring the risks posed by the omicron virus variant, and this week will focus on releasing the minutes of the latest Federal Reserve meeting and US wage data.

Blackstone’s Byron Wien and Joe Zidle said they see gold prices rise 20% to a new high this year.

“Despite strong growth in the United States, investors are seeking the perceived safety and hedge against inflation of gold amid rising prices and volatility,” the executives said Monday. “Gold reclaims its title of paradise for newly created billionaires, even as cryptocurrencies continue to gain market share.”

Spot gold rose 0.8% to $ 1,814.95 an ounce at 3:56 pm New York, after falling 1.5% on Monday. Bullion for February delivery gained 0.8% to $ 1,814.60 on Comex. Silver, platinum and palladium also advanced.

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