Due to the obvious Omicron news, investor sentiment about the forecast for oil demand became negative on Friday, as investors worried about the reintroduction of lockdowns and travel restrictions. As a result, oil prices plunged about 13 percent, falling below $70 per barrel. Since the coronavirus epidemic began in 2020, this has been the worst day for oil.
In response to the shift in market dynamics, OPEC+ has moved its technical committee meeting from Monday to Wednesday and its ministerial monitoring committee meeting from Tuesday to Thursday. The sessions will be extended in order to gather additional information on how the new coronavirus strain will likely affect demand in the coming months. During these meetings, the cartel will most likely assess how countries' use of strategic petroleum reserves may affect oil demand for OPEC+ members.
Following the Omicron announcement, the dollar index, which measures the US dollar against other major currencies and government rates, fell. The dollar index dropped about 0.4 percent from its peak in 16 months. Gold prices rise in the opposite direction of treasury rates and the dollar index as the opportunity cost of owning the precious metal falls, making it more tempting to investors. Furthermore, as investors reduce their exposure to riskier assets, demand for safe-haven commodities such as gold has increased, pushing gold prices upward. Moving ahead, how the Fed reacts to the Omicron variation, whether hawkish or dovish, will be the primary driver of gold prices.
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