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Gold & Indices React to Jerome Powell’s Words, European Inflation Climbs to a New Record & Omicron Concerns Send Oil Prices 5% Lower

Gold, S&P 500 drop on Powell testimony

Markets were shaken on Tuesday, as Federal Reserve chair Jerome Powell hinted at a possible speeding up of the tapering process, potentially bringing it to an end before the market expected.

Powell, who was testifying in front of the Senate committee said that “At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases”

💡 Jerome Powell
Jerome Powell has quite a list of issues that he will face as he begins his second term. From future cyber attacks threatening financial security, to the aftermath of COVID’s economic impact. Jerome Powell has an opportunity to leave his legacy as Fed chair.

This came as the Fed chair also commented on the Omicron variant of COVID-19, stating, “The emergence of the Omicron variant poses downside risks to employment and economic activity and increased uncertainty for inflation”.

Gold prices fell to their lowest levels in the last 3-weeks on the news, hitting an intraday low of $1,769.

The S&P 500 was trading 1.24% lower as of writing.

EURUSD rallies, as European inflation climbs to new record

In Europe, markets were moved by the news that the continent’s inflation rate for November climbed to a new high.

Figures from the Eurozone showed that the headline inflation rate was up to 4.9%, compared to expectations of 4.5%.

As we discussed in TGH, inflation is related to interest rates, which impacts exchange rates

The rate, which was higher than October’s final reading of 4.1%, is the highest level on record since data tracking of Eurozone inflation statistics began.

EURUSD rallied for a second consecutive session on the news, climbing to an intraday high of 1.1382, its highest level in 11-days.

Germany’s DAX 30 closed 1.18% lower on the news.

Oil prices drop 5% on Omicron concerns

Oil prices were down by as much as 5% in Tuesday’s trading session, as Moderna’s CEO raised concerns on the efficacy of vaccines against the Omicron variant.

The company’s CEO Stephane Bancel stated that, “There is no world, I think, where [the effectiveness] is the same level”.

WTI crude fell to an intraday low of $65 per barrel, its lowest level since August 23rd as a result of the uncertainty.

💡 Omicron’s impact on oil by the numbers
The “the most worrying” new Covid-19 variant caused the price of Brent crude to tumble by $8.77, or 10.7%, to $73.45 a barrel on Friday afternoon after countries across Europe and Asia brought in immediate travel restrictions to guard against the spread of the B.1.1.529 variant identified in several African countries.

Further research is needed, but so far no deaths have been linked to the new variant. Furthermore, the highly mutated virus has brought up the issue on preventing future pandemics. The new global deal, expected by May 2024, would cover issues such as sharing of data and genome sequences of emerging viruses, and of any potential vaccines derived from research.

Many believe if the vaccine is unable to act against the new variant, some governments may be forced into lockdowns as a response.

Many now wait to see what OPEC+ will do during next month’s meeting, to combat the recent price falls.

“It’s not what we do once in a while that shapes our lives. It’s what we do consistently.”

– Tony Robbins

Eliman Dambell

Senior Market Analyst