Gold gains on subdued bond yields, growth concerns

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  • Credit Suisse sees gold averaging $1,850/oz in 2022
  • U.S. 10-year yields steady close to a 3-week low

Dec 1 (Reuters) - Gold rose on Wednesday, as softer bond yields and uncertainty about economic growth due to the Omicron variant of coronavirus lifted its appeal.

Spot gold rose 0.3% to $1,778.56 per ounce by 0840 GMT. U.S. gold futures rose 0.2% to $1,780.60.

Gold fell to a one-month low on Tuesday after Federal Reserve Chair Jerome Powell said the Fed will discuss whether to end bond purchases earlier than previously anticipated in its December meeting and the word "transitory" is no longer the most accurate term to describe inflation. read more

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Fed Vice Chair Richard Clarida also said that bringing down inflation was important to keeping expectations anchored near the central bank's 2% goal. read more

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising non-interest bearing gold's opportunity cost.

Offering support to bullion, benchmark 10-year U.S. Treasury yields edged up, but remained close to Tuesday's close which was the lowest in three-weeks.

"The prospect of slowing economic growth and persistent inflationary pressure could see the ‘stagflation’ debate regain traction. Gold could benefit from this economic backdrop but remains tied to additional Omicron data," said DailyFX analyst Warren Venketas.

The United States imposed tougher COVID-19 testing rules for air travellers, while more countries tightened their borders to contain the spread of the Omicron variant. read more

Credit Suisse forecasts gold prices to average $1,850/oz next year before declining to $1,600/oz in 2023.

"The Fed will raise rates once in the second half of next year, and between now and then inflation will remain elevated, resulting in still deeply negative real rates, which is positive for gold," Credit Suisse said in a note dated Tuesday.

Spot silver rose 0.1% to $22.82 an ounce. Platinum gained 0.9% to $942.59 and palladium added 0.7% to $1,751.02.

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Reporting by Nakul Iyer in Bengaluru; Editing by Rashmi Aich and Barbara Lewis

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