Easing demand for safe-haven assets tips gold towards first fall in 3 years

Gold was heading for its first drop in three years on Friday as a global economic recovery made its safe-haven appeal less attractive and as central banks prepared to raise interest rates to contain inflation.

Heading into 2022, while concerns about the effect of the Omicron variant could support gold prices, higher Treasury yields might tarnish the metal's appeal, said Han Tan, chief market analyst at Exinity. [US/]

"Gold could see several catalysts for substantial gains next year, be it a Fed policy mistake, stubbornly elevated inflation, or even a spike in geopolitical tensions."

Spot gold rose 0.2% to $1,817.57 per ounce by 1035 GMT. U.S. gold futures rose 0.3% to $1,819.70.

Year-end risk hedging has pushed gold higher overnight, with resistance at $1,820, said Jeffery Halley, a senior market analyst at OANDA.

Buttressing gold, the dollar dipped, making bullion less expensive for buyers holding other currencies. [USD/]

Gold prices have declined more than 4% so far this year after rising 48% over the previous two years, as the global economic recovery reduced demand for the safe-haven metal.

Earlier this month, U.S. Federal Reserve policymakers agreed to speed up the wind-down of the central bank's bond-buying program, with a plan to end asset purchases in March to allow time for three interest rate hikes they now believe will be needed next year.

A Reuters poll in October showed analysts estimated that gold would average about $1,750/ounce in 2022, trimming earlier forecasts citing pressure from potential interest rate hikes. [PREC/POLL]

Gold in 2021 has traded between $1,676 and $1,959 an ounce, following its best annual performance in a decade last year, which also saw the metal touching an all-time high of about $2,072.50.

However, "gold held up reasonably well given all the pro-growth development and all the normalisation in monetary policy," said Dominic Schnider, head of commodities and APAC forex at UBS Wealth Management in Hong Kong.

Spot silver rose 0.5% to $23.15 an ounce while platinum dropped 0.2% to $959.27, and palladium fell 1.5% to $1,935.80, all on track for their biggest annual falls in several years.

 

(Reporting by Bharat Govind Gautam, Asha Sistla and Seher Dareen in Bengaluru, Editing by Louise Heavens)