Is it right time to invest in gold with stock markets under omicron

Global stock markets have been roiled under threat from new Covid-19 variant Omicron. Global markets including Indian bourses went into a tailspin following the news of a highly mutated variant of Covid-19.

The European Stoxx60 dropped 2.8% while Dow Jones in US saw its worst drop of the year as Wall Street indices plunged and the dollar floundered. Back home, BSE Sensex closed 1,687.94 points or 2.87% lower at 57,107.15 while the NSE barometer Nifty50 index settled 509.80 points or 2.91% lower at 17,026.45 marking the worst day for stocks in seven months.

The World Health Organisation recognised the newly-recognised omicron strain as a ‘variant of concern’.

Several countries including India imposed fresh restrictions on travel especially for inbound passengers from South Africa and a few other nations to screen against the new strain which heath experts say might be more transmissible.

The fresh bout of uncertainty once again puts the spotlight on safe-haven precious metals such as gold and silver.

Gold futures on Multi Commodity Exchange (MCX) gained Rs 219 or 0.46% from its previous day’s closing levels to Rs 47,640 per 10 gram on Friday. It touched a high of Rs 48,223 and a low of Rs 47,535 during the day.

Commodity analysts say a positive outlook for bullion in the near term can also be attributed to US Federal Reserve’s stance on interest rates hikes and depreciating Indian Rupee (INR) against US dollar (USD).    

Mixed sentiments were exhibited in global commodity markets on the last trading session in this week. Precious metals edged higher. London spot gold gained 1.0 percent and reclaimed above $1800 an ounce while spot silver gained moderately on Friday.

“Worries of new variant infection in Europe and subsequent growth worries improved safe-haven interest in gold. An easing dollar also bolstered prices to above USD 1800 an ounce,” said Geojit Financial Services in a note.

However, upside remained capped amid expectations that the Federal Reserve may hasten its monetary tightening to cool rising prices.

A turnaround is possible as long as the support of $1780 hold the downside. An unexpected drop be- low the same would negate the trend and liquidate further, it added.

Sriram Iyer, Senior Research Analyst at Reliance Securities said, “if MCX Gold February sustains below 47800 level, it will continue its negative trend up to 47600-47500 levels. Resistance is at 48000-48100 levels”.