Gold prices edged higher on Monday, hovering near a three-week high hit last week, as fears over the rapidly spreading Omicron coronavirus variant boosted the metal's safe-haven appeal.
Spot gold rose 0.2% to $1,801.21 per ounce by 0412 GMT, while US gold futures fell 0.2% to $1,802.00. On Friday, bullion prices had hit their highest since Nov. 26.
"There are a lot of reasons to own gold since real rates remain historically low even if the Fed raises interest rates. The bond market remains non-reactive in terms of terminal rates," said Stephen Innes, managing partner at SPI Asset Management.
Omicron uncertainty could lead to a more dovish central bank narrative in 2022, Innes said, adding that issues in Washington over the domestic investment bill and the Ukraine risk were also boosting the metal's appeal.
Asian shares slid as surging Omicron cases triggered tighter restrictions in Europe and threatened to drag on the global economy into the new year.
US Federal Reserve officials talked about raising rates as soon as March and starting to run down the central bank's balance sheet in mid-2022. However, the remarks barely changed the bond market's view that short-term interest rates could top out below the Fed's estimated peak.
Meanwhile, the US dollar index hovered close to a three-week high hit in the previous week, limiting gains in bullion as a firmer greenback makes the metal more expensive for holders of other currencies.
The dollar benefited as possibilities of more COVID-19 restrictions being imposed ahead of the Christmas and New Year holidays loomed over several European countries.
Underpinning bullion, benchmark 10-year US Treasury yields dropped, lowering the opportunity cost of holding non-interest bearing gold.
Spot silver fell 0.1% to $22.33 per ounce, platinum dropped 0.6% to $925.07 and palladium dipped 4.9% to $1,695.12.
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