Gold Picks Up Heading Into the New Year | ETF Trends

Gold prices are picking up heading into the 2022 as investors still assess the impact of the Omicron variant and COVID cases rise in the winter season.

Meanwhile, the impact of inflation is still weighing on the capital markets. This is allowing gold to trade sideways as opposed to feeling the downward pressure of a major sell-off.

“The ongoing trend (for gold) remains sideways to higher in the near term, and we believe that this trend is coming from the continuation of the inflationary pressures that we see building in the market,” said David Meger, director of metals trading at High Ridge Futures.

The city Xian in China is becoming a major hot spot for the virus as the government looks to curb rising cases with travel bans. According to a Reuters report, “Xian reported 150 new local symptomatic coronavirus cases for Sunday, a slight drop from the previous day’s 155, and officials warned that people flouting rules on travel or testing could face detention and fines.”

This could be helping a slight risk-off mood for the markets heading into the final days of 2021. Investors could be adding gold to help hedge the effects of the virus and market volatility despite the Dow Jones Industrial Average rising about 4% in the last five days.

“Gold inched higher as market participants assess the impact of the Omicron variant on the economy. Gold could remain supported at lower levels after China reported its highest daily rise in local COVID-19 cases in 21 months as infections more than doubled in the northwestern city of Xian, its latest hotspot,” said Navneet Damani, VP — Commodities Research, Motilal Oswal Financial Services.

Year-End Rally Par for the Course

While the equities market is seeing a year-end rally thus far, that’s spilling over into gold. According to some market analysts, this is simply par for the course.

“While there are concerns over the Omicron variant, the investment demand (for gold) is quite flat. So, it is just the year-end rally since there is still some risk-on sentiment present,” said Jigar Trivedi, a commodities analyst at Mumbai-based broker Anand Rathi Shares.

Investors looking for ways to own gold outside of traditional coins or bars can opt for gold funds. One such fund to consider is the Sprott Physical Gold Trust (PHYS), which gives investors easy access to gold exposure with the option to convert their ownership shares to physical gold.

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