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LONDON: Gold prices steadied on Monday near a three-week peak scaled last week as the spread of the Omicron coronavirus variant smothered appetite for riskier assets.

Spot gold was up 0.1% at $1,798.72 per ounce, as of 1008 GMT, while US gold futures were down 0.3% at $1,799.70. In the previous session, prices hit their highest levels since Nov. 26.

European stocks fell more than 2% amid a global sell-off in equities, with investors fretting over the spectre of tighter COVID-19 curbs hitting the global economy as cases of the Omicron variant surge.

Negative risk appetite on Omicron worries, and US Treasury yields being low - which reduce the opportunity cost of holding bullion - are supportive for gold prices, said Michael Hewson, chief market analyst at CMC Markets UK.

But reduced liquidity into the year-end and pressure from a firm dollar have caused gold to be “stuck in a little bit of limbo”, Hewson added.

A higher US dollar makes the greenback-priced bullion less appealing for overseas buyers.

Meanwhile, Omicron-led uncertainty could lead to a more dovish central bank narrative in 2022, while issues in Washington over the domestic investment bill and the risks around Ukraine are also boosting the metal’s appeal, said Stephen Innes, managing partner at SPI Asset Management.

Gold is considered a hedge against higher inflation and geopolitical uncertainties, but a US Federal Reserve rate hike would increase the opportunity cost of holding gold, which pays no interest. European Central Bank policymakers meeting last week sought a greater acknowledgement of inflation risks but were rebuffed by the bank’s chief economist Philip Lane in an unusually robust debate. Spot silver was little changed at $22.35 per ounce. Platinum fell 0.3% to $926.92, and palladium eased 2.9% to $1,729.77.

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