Gold edged higher on Tuesday after the United States reported a better than expected October trade deficit, raising expectations the Federal Reserve will stay on track to remove financial supports introduced early in the pandemic.
Gold for February delivery settled up $5.20 to $1,784.70 per ounce. The rise came even as the United States reported the country's October trade deficit eased to $67.1 billion, a six-month low, well under expectations for an $80.9-billion deficit and the $81.4 billion deficit in September.
The positive data is likely to raise support for a more hawkish stance from the Federal Reserve, which is tapering off monthly bond purchases introduced early in the pandemic and could raise interest rates as soon as next year.
The US dollar rose following the release of the trade data, up 0.1 points to 96.43. Bond yields also rose, bearish for gold since it offers no interest, with the yield on the United States 10-Year note last seen up 12.9 basis points to 1.47%.
Waning Omicron variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday and left traders offloading safe-haven currencies and bonds again.
Europe's FTSEurofirst 300 was on track for its first back-to-back run of plus 1% gains since February. Wall Street was poised to rally, while Asia had cheered record bounces by some of China's beaten-down tech giants.
The risk-on mood also helped the dollar climb against currencies such as the yen, which had lost 0.6% overnight, as the confidence-sensitive AUD also found buyers.
Safe-harbor German government bonds went the other way with yields - which move inverse to prices - up 2.5 basis points after falling to a three-month low on Monday.
Britain's prime minister warned Omicron looked the most contagious coronavirus variant yet, but reports in South Africa said cases there had only shown mild symptoms, and top US infectious disease official, Anthony Fauci, told CNN,
"It does not look like there's a great degree of severity."
And, researchers at ING said in a note,
"Good news relating to the severity of Omicron should be taken with a pinch of salt. Faster transmission could offset the benefits of milder symptoms. More broadly, it is still early days, even if markets are starting to display Omicron fatigue."
The gains also came after China's central bank on Monday injected its second shot of stimulus since July by cutting the cash banks must hold in reserve.
There was still uncertainty about its property sector as Evergrande (OTC:EGRNY) teetered on the brink of default again. Still, data showing much more substantial import growth was a positive sign on the strength of domestic demand, RBC analyst Adam Cole said.
E-commerce giant Alibaba's (NYSE:BABA) shares bounced from its record low to soar 12.2%, while Tencent (OTC:TCEHY) and Meituan (OTC:MPNGY) added 3.6% and 5.8%, respectively. Shares in embattled developer Evergrande also edged off a record low as markets waited to see if it had made an already-overdue $82.5 million bond payment or formally slumped into default.
Elsewhere
Australia's S&P/ASX 200 rose nearly 1% as its central bank left interest rates at a super-loose 0.1% and Japan's Nikkei advanced 1.9% as the yen dipped back.
Saxo Bank's head of FX strategy John Hardy said,
"We have had the Fed hawkish turn and Omicron hitting the market with both barrels recently but this week we have seen some dribbles of better news on Omicron,"
"The yen has snapped back lower and the commodity currencies have turned higher, it's just a snap back for now though rather than a trend,"
He added, cautioning it was too early to make conclusions about Omicron.
Also supporting the dollar in FX markets was the expectation the Federal Reserve will accelerate the tapering of its bond-buying program when it meets next week in response to a tightening labor market.
Oil prices jumped another 2% to $74.60 a barrel, adding to a near 5% rebound the day before as concerns about the impact of Omicron on global fuel demand eased.
That did not protect Russia's ruble, which fell 0.3% on worries a renewed conflict in Ukraine could see the United States and Europe slap heavy sanctions on Russia's banking system and the Nord Stream 2 gas pipeline.
US President Joe Biden and Russian President Vladimir Putin will hold a video conference at around 1500 GMT.
"God knows what the delta risk is on that meeting but the US is waving around the threat of more serious sanctions,"
Saxo's Hardy said that adding the "nuclear option" would ban Russian banks from the international bank-to-bank payment system called SWIFT.