Oil prices have been declining over the past few days as investors fear that rising coronavirus cases are likely to dent demand in coming months as countries move to raise restrictions to combat the number of infections from climbing even further. In Britain, Denmark, and South Africa, cases of the new strain are doubling every two days. Denmark's Prime Minister, Mette Frederiksen, warned on Thursday that more restrictions would most likely be imposed in the coming days. Similarly, in the United States, companies have postponed employees' coming back to the workplace until cases show a declining trajectory.
However, despite market sentiment dropping ahead of the holidays, financial institutions expect demand to rebound in 2022 and oil prices to return to their rising trend. According to Goldman Sachs, the Omicron variant has had a narrow impact on mobility and projects demand for crude oil to shatter historical peaks over the next two years.
The precious metal performed well last week, breaking through the critical $1,800 level on Friday, as investors shifted to the safe haven commodity, which acts as a hedge against inflation and increased volatility in financial markets. The United States' economy is expected to slow down in the first quarter of 2022, causing stock markets to correct and investors to shift their capital out of equity markets and into gold. However, as the Fed moves to raise interest rates, the outlook for gold is likely to be bearish. Higher interest rates raise the opportunity cost of holding the precious metal, lowering its price.
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