Gold prices eased on Thursday as investors bet the U.S. Federal Reserve would taper its bond purchases faster to tackle surging inflation despite economic recovery concerns amid the new Omicron coronavirus variant.
Spot gold fell 0.3% to $1,777.87 per ounce by 0639 GMT. U.S. gold futures dropped 0.3% to $1,778.10.
In congressional testimony on Wednesday, Fed Chair Jerome Powell said the central bank needs to be ready to respond to the possibility that inflation may not recede in the second half of 2022.
Powell also said the Fed would consider a faster tapering of its bond purchases at its upcoming two-day meeting due to start on Dec. 14.
Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, translating into a higher opportunity cost for holding bullion, which pays no interest.
“The more hawkish shift in rhetoric from Powell could overshadow for gold any bullish impulse from the Omicron virus until at least Friday’s non-farm payrolls report” said Stephen Innes, managing partner at SPI Asset Management.
The U.S. non-farm payrolls report could influence the Fed’s rate stance. The ADP National employment report showed on Wednesday private payrolls increased by 534,000 jobs in November.
Spot gold still targets $1,758 per ounce, as it has deeply pierced below a support at $1,780 and broken a rising trendline, according to Reuters technical analyst Wang Tao.
Spot silver rose 0.5% to $22.42 an ounce and platinum gained 0.7% to $940.09.
Palladium increased 0.5% to $1,756.46. But the metal has failed to recover from last week’s steep sell-off and continued to trade below gold for the first time since August, 2019.
“Palladium’s industrial use is getting weighed down because we’re not getting big demand from automobiles and that’s feeding into speculative fervor,” SPI’s Innes said.