Gold will need another catalyst heading into 2022 after the Omicron variant proved it wasn’t enough to resuscitate the precious metal’s prices further.

Gold briefly spiked heading into Thanksgiving, but the Omicron variant sell-off wasn’t enough to swing momentum in its favor. Rather than seeing a safe haven scramble to the precious metal, gold tapered off back into its sideways holding pattern.

Recent economic data, however, could prove otherwise. The U.S. manufacturing Purchasing Managers Index for December disappointed, which could bring more gold buyers.

“The gold market is seeing some new buying momentum as U.S. economic data continues to disappointing as preliminary estimates show slowing activity in both the manufacturing and service sectors,” Kitco News reports. “Thursday, IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for December dropped to a reading of 57.8, down from November’s reading at 58.3. Economists were expecting to see activity increase with the index rising to 58.6.”

Gold Price in US Dollars Chart

Data Still Points to Resiliency

On the other side of the spectrum, the latest PMI numbers may not prove to be disappointing enough for gold. This comes as three rates increases are scheduled for 2022, which could give gold further headwinds.

“Business growth slipped only slightly during the month and held up especially well in the vulnerable service sector,” said Chris Williamson, chief business economist at IHS Markit, adding, “Manufacturing output growth even picked up slightly amid a marked easing in the number of supply chain delays, which also helped to take pressure off raw material prices. Barring the initial price slide seen at the start of the pandemic, December saw the steepest fall in factory input price inflation for nearly a decade.”

“The worry is that rising wage growth, greater transport costs and higher energy prices have pushed service sector cost inflation to a new high, and that any renewed disruption to global supply lines resulting from the Omicron wave could lead to renewed upward pressure on goods prices,” Williamson notes.

Investors interested in gold exposure can look at the Sprott Physical Gold Trust (PHYS). PHYS investors get easy access to gold exposure with the option to convert their ownership shares to physical gold, should they choose to do so.

PHYS invests and holds substantially all of its assets in physical gold bullion. It seeks to provide a secure, convenient, and exchange-traded investment alternative for investors who want to hold physical gold without the inconvenience that is typical of a direct investment in physical gold bullion.

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