Gold plunged by more than $110, its biggest one-day drop in seven years, while silver plunged by nearly 15 per cent. Apart from the coVID-19 vaccine, more profound reasons have been revealed. In the current session, the market is focused on THE U.S. CPI data, and with trade talks between China and the U.S. approaching on August 15, Kudlow’s latest revelation: China is still buying U.S. goods, and investors are on alert for any unexpected news.
On Tuesday, the gold market took a beating, with bears in hot water and the price plummeting from a high of around $2,030 to below the 2000 level before heading for the 1,900 level. The price fell by more than $110, or 5.5%, its biggest one-day drop in seven years.
Russia’s first COVID-19 vaccine has been registered in Russia, President Vladimir Putin said on Monday. The vaccine, named Sat-V, has been registered in Russia and his daughter has been given the first vaccination.
He told a government conference that he hoped the vaccine would be ready for mass production as soon as possible, and gave details of his daughter’s vaccination.
Russia’s health minister says the vaccine gives the body immunity for up to two years.
The vaccine was developed by the state-run Kamari Institute in Moscow and funded by the Russian Direct Investment Fund. It was developed using the same technology used in previous ebola and MERS vaccines developed by the institute.
The vaccine has now been named Sputnik V, ria Novosti reported. According to the Russian National Drug Registration Network, the vaccine will officially enter the civil circulation on January 1, 2021. Russia’s sovereign wealth fund (RDIF) said it had received requests from more than 20 countries to buy Russia’s covid-19 vaccine, which is expected to start mass production in September and will produce more than 500m doses a year, Russia Today reported.
Asked about Russia’s announcement that it was the first country to register a vaccine against the virus, the SECRETARY of Health and Human Services said it would be better to develop a safe and effective coVID-19 vaccine than rush to produce one.
“It feels like a mini-crash,” said Edward Moya, senior market analyst at OANDA. Gold couldn’t shake off the Russian vaccine news, and continued optimism sent investors pouring into stocks. “
Gold accelerated its slide below the $2,000 mark and continued to extend its losses on news of the Russian vaccine. However, some analysts pointed out that the deeper reasons for the decline in gold and U.S. Treasury yield performance.
U.S. Treasury yields jumped to one-month highs on Tuesday as stocks neared record highs, reducing demand for safe-haven government debt. On Wednesday, the U.S. Treasury will sell its largest-ever sale of 10-year debt.
Rising Treasury yields and reduce the support gold negative real interest rates. The yield on the 10-year Treasury note its biggest gain since June, is expected to have a lot of government and corporate bond issue. In addition, U.S. producer prices rose faster than expected.
“Real interest rates were significantly higher on Tuesday, which is clearly what drove gold lower,” Michael Widmer, head of metals research at Bank of America Merrill Lynch, said in a telephone interview from London. The PPI Numbers are stronger, and I think when they come out, the market will take a different view of interest rates and expectations.”
“This is very sudden and brutal, but previous price rises have been even more sudden and brutal,” Carsten Fritsch, commodities analyst at Commerzbank AG, said by telephone. The trigger could have been a sharp rise in bond yields, which led to some profit-taking and then a chain reaction. When people start taking profits, more people follow, so we see gold accelerating.”
New news on China-Us trade!
It comes at a time of growing tension between the United States and China over issues ranging from Hong Kong to the South China Sea.
Trade between the two countries appears to be moving along well with China’s massive imports of U.S. agricultural products such as soybeans, and White House economic adviser Larry Kudlow said Aug. 11 that China is continuing to honor the first phase of the trade agreement signed in January 2020.
Asked if the first phase of the trade deal would be thrown aside if u.s.-China relations deteriorated over other issues, Kudlow said no, saying the two countries are focusing on the trade area and doing well.
China and the United States have agreed to hold high-level talks on August 15 to assess China’s compliance with a bilateral trade agreement signed in early 2020, according to the Wall Street Journal. The high-level meeting will be held via video conference.
The newspaper reported that the talks will include the United States trade representative, Robert Wright jersey (Robert Lighthizer) and China’s vice premier Liu crane (Liu He), the two sides will focus on January 15, 2020, signed by the government of the People’s Republic of China and the United States of America government economic and trade agreement, the agreement calls for China’s commitment to expand since the agricultural products, energy products, manufactured goods, services, products imports, imports over the next two years, to base on the increase of not less than $200 billion in 2017.
At the upcoming meeting, the two countries will review the implementation of the first phase of the trade agreement, potentially voicing grievances at a time of growing tensions between the two countries, Reuters quoted sources as saying.
What’s next for gold?
After the shock and awe crash, gold what to do next in the spotlight.
“I don’t think the underlying, fundamental, positive rationale for gold has gone away,” Tom Fitzpatrick, technical strategist at Citigroup, said by phone. Once that momentum lags, we could consolidate for a while, but we still think we could get back to $2,400 by year end.”
Bank of America’s Widmer said gold’s rise was a lull and reiterated the bank’s 18-month target of $3,000.
“The financial repression has not gone away and I don’t think the dollar depreciation has gone away,” Widmer said. Right now, central Banks are implicitly supporting governments, and I think that’s the strong support behind the $3,000 call option.”
Carsten Fritsch, analyst at Commerzbank, said: “The rise in gold prices is almost entirely due to strong investor demand, with almost all other elements of demand playing little role. It is understandable that investors now seem to be taking profits.”
The analyst said a very pronounced pullback, such as that seen in mid-March, was unlikely. Above all, gold and silver prices have not reached the end of the road, adding that gold prices would resume their upward trend after further falls.
“However, the long-term outlook for gold and silver remains positive,” he wrote. Once the current adjustment is over, prices could start rising again.”