Gold (XAU/USD) inched higher and is trading around $1,810 during the Monday Asian session. Yellow metal is trading high as slightly weaker U.S. Treasury yields offset an uptick in the dollar.

US Dollar Index (DXY) dropped to 96.10 whereas the US 10-year Treasury yields dropped 1.1 basis points (bps) to 1.482%, stepping back from a two-week high flashed the previous day.

Upbeat spending in US favors the yellow metal. Holiday sales rose at the fastest pace in 17 years, even as shoppers grappled with higher prices, product shortages and a raging new Covid-19 variant in the last few weeks of the season, according to one spending measure. Mastercard Spending Pulse, which tracks all kinds of payments including cash and debit cards, reported Sunday that holiday sales had risen 8.5% from a year earlier. Mastercard Spending Pulse had expected a 7.4% increase.

Elsewhere, US VP Harris response optimistic on getting President Joe Biden’s Build Back Better (BBB) plan although of the latest challenges raised by Senator Joe Manchin. Goldman Sachs says, “While Congress is likely to approve some new spending on manufacturing and supply chain-related incentives, we no longer expect the Senate to pass the Build Back Better bill and the near-term spending it includes on the extension of the expanded child tax credit”

On the other hand, The escalating fears over the South African COVID-19 variant dubbed as Omicron causes fear and in turn weighs on Gold. Coronavirus cases had jumped in the West and they have recalled major activity restrictions despite the holiday season. The average number of new US coronavirus cases has shown a rise of 45% to 179,000 per day over the past week whereas the UK and France had reported a fresh high of Covid-19 daily infections, respectively crossing 122,000 and 94,000 daily cases at the latest.

The increase of the covid cases also brings the travel restrictions and limited activity during an this heaving spending holiday period. Reuters noted “Commercial airlines around the world canceled more than 4,500 flights over the Christmas weekend, as a mounting wave of COVID-19 infections driven by the Omicron variant created greater uncertainty and misery for holiday travellers.”

However, Studies have shown fewer hospitalization is caused due to Omicron which in turn creates optimism among Gold buyers.

XAU/USD 4 Hour Chart:

Support: 1802.2 (S1), 1799.1 (S2), 1794.0 (S3).

Resistance: 1810.5 (R1), 1815.6 (R2), 1818.7 (R3).

Mixed concerns of Omicron along with the cautious optimism on US President Joe Biden’s Build Back Better (BBB) plan favors the yellow metal. We expect a bullish trend for XAU/USD.