Omicron Variant: Gold Rises, Oil Falls

Omicron Variant

Omicron – a new COVID-19 variant is making the rounds, and already analysts are talking about a sell-off. The news about new variants of the coronavirus discovered in South Africa are indeed worrying. We don’t quite know its full range of effects yet, and several new mutations may be propagating at once.

In principle, the stock markets can deal with bad news if they know exactly how bad it is. But uncertainty is poison for the stock markets. Accordingly, the Dow and DAX corrected significantly on Friday. But there have been even larger movements on the non-equity markets…

Oil: Steepest Decline Since April 2020

One of the most discounted things for sale on Black Friday was oil; it lost more than $10 intraday. Brent Crude Oil (BZ=F) fell as low as $72. At the beginning of November, the price was still almost $86. It’s the steepest decline since April 2020.

The trigger for the sharp decline is concern that the spread of the new virus variant could affect oil demand more severely, and that we might even see oversupply again next year. However, it’s worth remembering that trading volume was very thin last week due to the Thanksgiving holiday in the U.S., which may have temporarily exaggerated oil’s slide. 

Gold in Demand Again as a Safe Haven

In contrast to oil, Gold (COMEX:GC=F) has made a new start. It’s now on the verge of cracking the technically-important $1800 level. Although interest rate hikes are expected soon in the U.S., there are fears that an overly-rapid rate hike could stall the economic recovery again because of the new Omicron variant.

However, the high level of risk aversion among market participants is bringing gold back into focus as a safe haven. In contrast, industrial metals such as silver are coming under pressure. This is in part due to a spike in margin calls during the recent selloff.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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