Gold climbs as Moderna CEO’s warning rattles risk appetite

Gold rose on Tuesday as investors sought safe havens again after Moderna’s CEO warned that COVID-19 vaccines were likely to be less effective against the Omicron variant, putting bullion on course for a second straight monthly gain

Spot gold gained 0.7% to $1,796.70 per ounce by 1036 GMT, while U.S. gold futures advanced 0.7% to $1,798.30

The Moderna chief’s comments rattled financial markets, leading to a slide in European equities

The U.S. dollar index also fell 0.6%, helping gold’s advance by making it a cheaper bet for overseas buyers, while U.S. benchmark 10-year Treasury yields weakened as well

“The main aspect behind the slight recoveries in gold is certainly the renewed concerns stemming from the new coronavirus variant and a higher risk aversion in general among market participants,” Commerzbank analyst Daniel Briesemann said

At the same time, if the U.S. Federal Reserve “decides to continue with its tapering process at a slower pace and maintains the ultra loose monetary policy for a longer period of time, this should be positive for gold,” Briesemann added

Gold tends to benefit from stimulus measures as it raises the prospect of inflation which bullion is used to hedge against, but interest rate hikes raise the opportunity cost of holding gold

Fed Chairman Jerome warned on Monday that the new COVID-19 strain muddied the central bank’s inflation outlook and prices could continue to rise for longer than thought

“It is hard to say how much of an impact (Moderna CEO’s remarks) will ultimately have on gold as markets are still digesting the comments,” CMC Markets UK’s chief market analyst Michael Hewson said, adding bullion could head back to the $1,800 level if equity markets fell further