Futures & Commodities

Gold jumps as new virus variant fears grip investors

A five hundred gram gold bar, left, and a a one kilogram gold bar, produced by Swiss manufacturer Argor Hebaeus SA, in Budapest, Hungary, on Wednesday, July 20, 2016.
Akos Stiller | Bloomberg | Getty Images

Gold gained on Friday as concerns about a hit to the global economic recovery, due to the spread of a new coronavirus variant identified in South Africa, drove investors to the safety of bullion.

Spot gold jumped 0.9% to $1,805.26 per ounce. U.S. gold futures advanced 1.2% to $1,805.20.

The variant spreading in South Africa possibly evades immune responses and has prompted Britain and the European Union to halt travel from the African nation.

"Markets fear this new variant could weigh more strongly on the economy than the Delta variant discovered a year ago and this has spurred some safe-haven demand for gold," Quantitative Commodity Research (QCR) analyst Peter Fertig said.

European stocks tumbled and were set for their worst session in more than a year.

Aiding gold's climb, the dollar index eased 0.4% from a 16-month peak scaled earlier this week, reducing bullion's cost to buyers holding other currencies. U.S. benchmark 10-year Treasury yields also weakened.

On a weekly basis though, the metal was heading for its worst week since Aug. 6 on increased expectations that the Fed could taper its asset purchases and raise interest rates at a faster pace.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of non-interest-bearing gold.

Michael Langford, director at corporate advisory AirGuide, expects gold to decline further on higher chances of Fed sticking to its tapering timeline.

"The Fed is unlikely to alter its taper timeline as monetary policies are closely intertwined with the government's public sentiment that any change would be negative for their election prospects, limiting gold's decline."

Elsewhere, platinum fell 2.3% to $972.67, while palladium dropped 2.6% to $1,812.28.

QCR's Fertig attributed palladium and platinum's declines to fears the new variant could hurt auto consumption as well as demand for the precious metals used in automobile exhaust systems.

Spot silver was down 0.5% at $23.45 per ounce.