LAWRIE WILLIAMS: Gold’s positive Christmas close
After a fairly volatile week price-wise, gold managed to end the pre-Christmas period in positive territory above the $1,800 level at $1,809.2. Whether this is the precursor of better things to come for the yellow metal up to the year end, and in early 2022, is still uncertain, but some analysts feel that it is back on path to return to the $1,850s., or even higher. Silver, platinum and palladium all moved higher too – the latter particularly so widening the price differential with platinum to over $900, after falling to not much north of $700 at the end of last week.
Certainly the post-FOMC meeting statement last week was not quite as downbeat for the gold price as many had feared, and all the precious metals moved up in price as the words of Fed chair Jerome Powell were digested and analysed. Initial reaction tended to be positive in Asian and European trade, but not quite so much so in North America. However it looks as if the global take on likely developments may have prevailed, at least for the time being, and prices moved upwards materially even in the U.S., but admittedly on pretty thin trade immediately ahead of the holiday season.
Overhanging all this of course is the impact of a new wave in coronavirus infections, brought on presumably by the seemingly hugely more transmissible Omicron variant. This had already been having a huge impact in new infections in Europe, but now seems to be taking hold big time in the U.S. Over 260,000 new infections were recorded in the U.S. on Thursday and more than 1,000 deaths, despite the new variant appearing to be less deadly than previous virus mutations. The infection rate, which is already higher than the previous peak in January looks as though it may still be rising as the Omicron mutation takes hold, although the numbers of virus-related deaths do not seem to be nearly as high.
There has been a tendency in some countries, though, to so far let the virus run its course, although a number of European countries have been imposing partial lockdowns and one suspects some U.S. states will do so too. The new virus mutation creates a huge dilemma facing politicians globally. Do they take measures to try and thwart rising infections and hospitalisations and re-stifle their economies. Or do they accept that the virus is now endemic and try and keep economies going with minimum disruption? The pendulum seems to be swinging towards the latter course, but whether this prevails will likely depend on headline mortality rates.
The whole coronavirus situation adds a further degree of uncertainty into the economic mix. Precious metals, and gold in particular, tend to thrive on uncertainty as safe haven investments so perhaps portents are positive for them for the time being but, as in the year past, 2022 could also prove to be a difficult year. Nevertheless we see enough positives on the horizon to forecast at least a reasonable year ahead for gold, silver and platinum, although we feel palladium may struggle to remain in positive territory. That is unless there is a rapid end to the growth in Covid infections, and normalcy returns to the economy and we see a positive uptick in new car registrations.
25 Dec 2021