Great news for the world, has negative implications for gold investors and traders

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Yesterday’s commentary first began with the news that the CDC had confirmed that they have identified the first case of the Omicron variant in America. The opening paragraph stated that the news was not alarming because it has been a matter of when and not if this new variant would begin to circle the globe and possibly become the number one dominant variant taking the place of the Delta variant.

However, from there I propose the distinct possibility that this new variant while extremely contagious could have less detrimental effects on those infected. This was based upon the fact that while we only had a data sample of one, that individual exhibited only mild symptoms not requiring hospitalization and then was put into self-quarantine.

It seems as though that singular instance is becoming a benchmark for the most recent data coming out of the World Health Organization and CDC. The newest data suggests that the symptoms are indeed milder than previous Covid 19 infections. The CDC has confirmed that a second and third case. have been identified, and in all three cases, the individuals contracting the virus were fully vaccinated. In all three cases, individuals contracting the omicron variant have either fully recovered or are in the process of recovering.

The data sample is still too small to draw any generalizations however two things seem clear from the initial data. First, these cases all involve fully vaccinated individuals who had their first two shots but not a booster. Secondly, none of these individuals required hospitalization. Currently, the World Health Organization has confirmed the identification of the new variant in 23 countries worldwide.

The caveats to the statements above are that first, more data needs to be collected before coming to an educated conclusion as to whether or not this new variant causes more severe disease. Secondly according to Singapore Doctor Leong Hoe Nam, “Frankly, omicron will dominate and overwhelm the whole world in three to six months”

Lastly, what is unknown also is how contagious this new highly mutated variant is however, although currently the new variant is associated with higher transmissions and a decrease in antibody protection. It is also believed that it would take months to develop and ship a vaccine that specifically targets the new variant, according to Moderna’s CEO Stephane Bancel. Although the common belief amongst scientists and virologists is the current vaccine may have a reduced efficacy level to combat the omicron variant.

The World Health Organization has recommended actions for countries

As Omicron has been designated a variant of concern, several actions recommended for countries to undertake, including enhancing surveillance and sequencing of cases;  sharing genome sequences on publicly available databases, such as GISAID; reporting initial cases or clusters to WHO; performing field investigations and laboratory assessments to better understand if Omicron has different transmission or disease characteristics, or impacts the effectiveness of vaccines, therapeutics, diagnostics or public health and social measures.  More detail in the announcement from 26 November. 

It seems as though market participants, investors, and traders have focused upon the good news contained within the most recent data from the CDC and World Health Organization.

As such U.S. equities staged a dynamic rally today, with the Dow gaining 617 points or 1.82%. The NASDAQ composite gained 236 points which is a net increase in value of 2.06% and the S&P 500 gained 1.42%. Investors involved in the U.S. equities markets believe that the fallout from this latest variant will be contained and not have the same kinds of economic pressures that were inherent to the Delta variant.

This sentiment also spilled into the safe-haven asset gold which once again traded under moderate pressure resulting in a decline by $14.60, basis the most active February futures contract which is currently fixed at $1769.70.

It is also noteworthy to point out that the disconnect between the positive correlation between gold and silver pricing continues to diminish. The most active silver contract gained almost 7 cents in trading today and is currently fixed at $22 40 ½ cents. The forward-looking analysis is under the assumption that the risks inherent to this new variant will be considerably less than that of the most prominent Covid 19 variant, Delta.

According to Chintan Karnani, director of research at Insignia Consultants, “Most traders and investors believe that the omicron variant “won’t cause catastrophic damage to the global economy,” adding that “They are preferring stocks over safe havens like gold,” he said. “Technical traders are also not buying as short-term technical indicators are bearish.”

However, with the information currently available for the most part traders are acting upon their gut rather than the science. The current information available does not have comprehensively identify all aspects of the new variance effect on humans and the economy. Until more complete data is available, “traders are just hitting in the dark”.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer