In a sign of the complexities of market sentiment, spot gold fell sharply on Monday on vaccine news, hitting an intraday low of $1,864.89 an ounce before quickly paring its losses to move back into positive territory. On the one hand, the positive news on vaccines has reinforced the market’s confidence that the economy is returning to normal, which has severely dampened the demand for gold as a safe haven. On the other hand, weaker safe-haven demand has also helped depress the dollar, providing support for gold. But there is a third force hitting gold: a partial launch of the vaccine in December, if it does take place, would significantly reduce the urgency of an aid package for Congress after the election dust settles, keeping inflation risks in check. So overall, gold’s recent momentum has been bearish.
Moderna announced Monday that its experimental vaccine is as effective as 94.5 percent, which is higher than Pfizer’s announcement last week. Even better, Moderna reports that its coVID-19 vaccine has a longer shelf life. It is stable at the refrigerator temperature for 30 days, which is more relaxed than Pfizer’s ultra-low temperature refrigeration. Covid-19 vaccine does not require field dilution. However this vaccine can be described as a big message, and did not bring a bigger boost to the market, the main reason is Pfizer news comes out, the market has favorable economic recovery to move within a week to digest, positions have also made some adjustments, so that the impact of the news today is not very big, but it also cannot deny that economic recovery prospects looked up further.
Gold, meanwhile, is pricing in geopolitical risk after the US election. When Biden finally takes office, market analysts said, the receding geopolitical risks posed by the U.S. government would ease demand for gold. Jim Steel, chief precious metals analyst at HSBC, notes that “if there is some settlement between the US and other countries on trade issues, not just one country, but possibly several. The Biden administration could also launch a charm offensive against U.S. Allies or other countries, and then geopolitical risks would go down, trade would move forward, and that would be bad for gold.”
What investors need to focus on right now is how Washington evaluates the urgency of the next round of fiscal stimulus. The second wave of the pandemic has started in the United States, and despite the good news about the vaccine, the market will not have enough certainty until it is actually distributed, which will also increase the pressure on the Federal Reserve.
Technically speaking, for the time being, the lower part of the gold price is more important to support in the 1837-1860 area. If this area is lost, it will not rule out a periodic peak and further fall to around 1765 to seek support. If it remains above the 1837-1860 zone, the bulls will be looking for a chance to rebound, with the upside target pointing to the 1950-2000 zone.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said the vaccine news would not change short-term gold expectations. “With the coming winter, there will be more stimulus to support the market, which is positive for gold.”
Nicholas Frappell, global managing director of ABC Bullion, said he expected the gold market to remain in a narrow range of volatility with key upside resistance at $1907, although the lower $1,850 / oz barrier may be more of a concern. “If the price of gold falls below 1850, it will soon be heading towards $1,838 an ounce.”