PRECIOUS-Gold steadies as COVID variant tempers rate hike expectations

BY Reuters | ECONOMIC | 11/29/21 05:46 AM EST

(Updates prices)

* Dollar edges up, equities rebound

* More countries impose travel restrictions

* President Biden to give update on U.S. response on Monday

By Arundhati Sarkar

Nov 29 (Reuters) - Gold steadied near $1,800 an ounce on Monday after the previous week's broad decline, as fears that the new Omicron coronavirus variant could hamper economic recovery tempered expectations for interest rate hikes next year.

Spot gold was little changed at $1,791.97 per ounce by 1306 GMT after ending last week 2.9% lower, its biggest weekly drop since June. U.S. gold futures rose 0.4% to $1,792.80.

The prospect of higher rates, which lift the opportunity cost of holding non-yielding assets, had been weighing on gold, and the market is closely tracking the timeline for the U.S. Federal Reserve to tighten policy.

"If the virus does lead to renewed worries about economic activities, central banks will obviously be caught in between a rock and a hard place because inflation is not going to come down... but growth will, and that leaves them in a very precarious situation," Saxo Bank analyst Ole Hansen said.

Financial markets slipped sharply on Friday on fears the variant would disrupt the economic recovery from the two-year pandemic.

With new cases of the Omicron variant found in the Netherlands, Denmark and Australia, more countries have imposed travel restrictions.

"Gold is taking (its) cue from interest rate expectations," Hussein Sayed, chief market strategist at Exinity Group, said.

"Now markets expect only two rate hikes for 2022, down from three. The shift in rate expectations is helping gold gain some ground, but the move is insignificant so far."

Capping gold's moves, the dollar edged higher - making gold more expensive for overseas buyers - and equities regained some composure after sinking last week on fears that the new variant could bring fresh curbs.

Elsewhere, spot silver rose 0.3% to $23.20 per ounce.

Platinum gained 1.5% to $967.50, and palladium climbed 2.1% to $1,783.83. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber, Bernadette Baum and Jan Harvey)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.