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Just before 1pm this afternoon, the spot price of gold was up 0.3 percent at $1,816.55 (£1,352.50) an ounce. This is the highest it has risen since November 22.
Meanwhile, gold futures rose 0.5 percent to $1,818.40 (£1,353.88).
Other precious metals also saw an increase in value, as traders look to invest in assets less tied to the US economy.
Many countries faced rising inflation this year as economies unlock from the pandemic, putting pressure on currencies like the US dollar.
America is currently grappling with the rapid spread of Omicron, with Joe Biden saying yesterday (Monday) that hospitals in some parts of the country may be “overrun”.
US inflation has been steadily rising over the course of 2021, reaching a new high of 6.2 percent in October.
In January, it stood at just 1.4 percent.
It comes at a time when the value of the dollar has suffered from the coronavirus pandemic.
The dollar had been at a sharp high of 86 pence in March last year, before steadily dropping to 71p in February of this year.
After a slight return, it had dropped back to 74p towards the end of December.
Jigar Trivedi, a commodities analyst at Mumbai-based broker Anand Rathi Shares, said that the positive sentiment towards gold at the moment was as a result of a weaker dollar.
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He told Reuters: “While there are concerns over the Omicron variant, the investment demand is quite flat.
“So it is just the year-end rally since there is still some risk-on sentiment present.”
Mr Trivedi added: “Gold may not rally too much in the absence of any major economic data and it will remain in this range.”
According to Reuters analysis, the US dollar had recently slipped to the lower end of its trading range when compared to other currencies.
This made gold more of an appealing investment to holders of other currencies.
Meanwhile, the price of silver rose 0.6 percent to $23.18 (£17.26) an ounce while platinum gained 0.7 percent to $977.51 (£727.80).
Palladium rose 0.2 percent to $1,975.43 (£1,470.80).
Coronavirus stimulus by the Federal Reserve is set to cease altogether by the end of March, with interest rates expected to rise in an effort to keep inflation in check.
One analyst suggested that these actions could see gold trade even higher in the new year.
Harshal Barot, a senior research consultant for South Asia at Metals Focus, said: “Given Omicron’s rise, expectations of hawkish Fed action in 2022 will see a rethink; and if this happens, gold could start to break out of its range.”
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