Spot gold is bullish in the short term, but there are clear bearish factors for next year, facing a strong opponent

　 Friday (December 31), Spot gold continued its upward trend from the previous trading day, due to the US dollar index weakening, and the global surge in new COVID-19 infections reaching record highs. However, the global economy's recovery from the pandemic's impact has reduced demand for safe-haven gold, and gold prices are poised to record their worst annual performance in six years.

At 19:19 Beijing time, Spot gold it rose 0.23% to $1820.10 per ounce; the COMEX gold futures contract rose 0.37% to $1820.9 per ounce; the US dollar index it fell 0.10% to 95.935.

Omicron cases continue to surge

　　US health experts urged Americans on Thursday (December 30) to prepare for significant disruptions in the coming weeks as rising COVID-19 cases, led by the Omicron variant, threaten hospitals, schools, and other sectors affecting daily life.

　　Meanwhile, the seven-day average of new daily cases in the US exceeded 290,000, setting a record high for the second day in a row. Federal officials further issued travel warnings and are reportedly preparing to authorize booster shots for children aged 12 to 15 next week. Booster shots for those aged 16 and above have already been approved.

　　The US Centers for Disease Control and Prevention (CDC) said that due to the rapid spread of the Omicron variant, the daily increase in new COVID-19 cases in the US has climbed to a record high, and people should avoid cruise travel regardless of vaccination status.

　　South Korea said on Friday that it will extend stricter social distancing rules for another two weeks due to the continued surge in severe COVID-19 cases and concerns about the spread of the highly contagious Omicron variant.

　　According to data from the Russian Federal State Statistics Service, Russia has surpassed Brazil to become the second country with the most COVID-19 deaths in the world, second only to the United States. Three sources in the Russian political circles said that Russia is preparing for another wave of COVID-19 in early next year, mainly triggered by the spread of the highly contagious Omicron variant.

　　Although data from some countries show that the Omicron variant causes less severe illness, it is too early to assess its impact on the world, especially considering the uneven vaccination rates. The continued surge in cases in the short term will continue to receive positive feedback from the gold market.

　　Steady recovery

　　The US Department of Labor said on Thursday that initial jobless claims fell in the week before Christmas, and continuing jobless claims also fell to their lowest level during the COVID-19 pandemic, indicating that the rapidly spreading Omicron variant has not yet impacted employment, which is positive for the record high of US stocks.

　　Mohamed A. El-Erian, Dean of Queens' College, Cambridge University, said: "The Fed could have started tightening monetary policy earlier, but its slow response to inflationary pressures has increased the likelihood that it will have to slam on the brakes later—raising interest rates very aggressively and quickly after completing the bond-buying reduction process."

　　 UBS (17.87,  -0.05 ,  -0.28% ) Dominic Schnider, head of wealth management commodities and Asia-Pacific foreign exchange at UBS, said: "Given all the growth-positive developments and the normalization of monetary policy, gold has performed quite well. You could say that if we didn't have inflation, the gold price would be much lower."

　　 Kyle Rodda, analyst at IG Markets, said, But in the long run, he is bullish on the dollar because the Fed is about to raise interest rates, and the likelihood of future lockdowns in the US is significantly reduced. US health authorities have now shortened the recommended isolation period for asymptomatic Americans from 10 days to 5 days. Credit Suisse (9.64, 0.01,  0.10% ) predicts that the price of gold will remain around $1850 in 2022, but it could fall to $1600 as central banks raise interest rates. Fahad Tariq, precious metals analyst at the institution, said: "In terms of interest rates, the market generally believes that the Fed may raise interest rates multiple times in 2022, but given the record debt levels in the US, there is uncertainty about how high interest rates will actually rise."

　　The rise of "digital gold"

　　In addition to the more hawkish Fed and the potential normalization of inflation, the substitution effect of cryptocurrency investment is also a potential downside risk for gold in 2022. Although gold is still considered a safe-haven asset, financial experts believe that younger investors are using cryptocurrencies as a store of value.

　　David Beattie, analyst at deVere Group, said in a report: "While gold will remain an established safe-haven asset during times of economic turmoil, it's clear that younger generations (and increasingly older ones) are seeking Bitcoin to serve the same purpose in the digital age,"

　　Bitcoin rose above $60,000 at the beginning of the year, then halved to below $30,000, before regaining momentum and hitting a new all-time high of $69,000. It soared by over 300% for the year. Ethereum once rose to over $4800, then fell below $4000, soaring over 400% for the year.

　　The cryptocurrency market, valued at over $2 trillion, experienced a rollercoaster ride in 2021, filled with highs and lows. Financial experts believe that the market has stabilized, and many investors see digital currencies as a store of value in an inflationary environment, giving them the title of "digital gold."

　　 Spot gold Up to $1829

　　From a daily perspective, gold prices are still in the rebound (B) wave that started from $1752, breaking through the 50% Fibonacci retracement level of (A) wave at $1815, and are expected to further test the 61.8% Fibonacci retracement level of (A) wave at $1829. (A) wave and (B) wave are both sub-waves of the downward ((Z)) wave that started from $1877, and ((Z)) wave belongs to the adjustment wave IV that started from $2075.