Gold eased in choppy trading on Monday as investors tried to gauge the impact of soaring Omicron coronavirus cases and the extent of the U.S. Federal Reserve’s rate hikes on soaring inflation.

Fundamentals
Spot gold fell 0.2% to $1,793.33 per ounce, as of 1845 GMT, while U.S. gold futures settled down 0.6% at $1,794.60 per ounce.

Global equities retreated on worries over the impact of tighter COVID-19 curbs, but safe-haven inflows into gold seemed to have stalled.

Gold also found little support from a lower dollar.

This was in contrast to Friday, when Omicron-led worries pushed gold prices to a peak since Nov. 26.

“Gold had a nice little bit of a rally and now we’re entering that holiday period where there’s no longer full participation from traders and you’re probably going to see reduced appetite for risk doing little to help gold,” said Ed Moya, senior market analyst at brokerage OANDA.

The choppiness is likely to persist into the year-end before an eventual consolidation above the key $1,800 level in the next month or so amid Omicron headlines, Moya added.

Although bullion is considered a hedge against higher inflation and uncertainties, rate hikes would increase the opportunity cost of holding non-yielding gold.

But Omicron-led uncertainty could lead to a more dovish central bank narrative in 2022, helping gold, analysts said.

“We could still see modest upside for precious metals as the bearish tilted positioning slate suggests the metal may be more responsive to any doubts that begin to arise surrounding the Fed’s ability to deliver on their hawkish stance,” TD Securities said in a note.

Worries about the economic impact of COVID-19 curbs seemed to have seeped into the other metals, which tend to follow wider market cures more closely.

Palladium dropped 2% to $1,746.85 per ounce, while platinum rose 0.1% to $930.50 per ounce. Silver shed 0.3% to $22.28.