- Bulls are yet to gain back control as the market awaits the Fed’s next move.
- The risk-on apatite in US stocks on a post covid risk marketplace is damaging the precious metal.
The yellow metal is down a touch, by some 0.22% at the time of writing, reading at $1,1875.96, having travelled between a range of $1,863/84.
It’s been a better mood on Wall Street, so far, today and the benchmarks are gaining, printing just shy of their records.
The US dollar has struggled, however, and that is propping the precious metals markets up to some extent.
On Wednesday, there has been further positive COVID19 vaccine news which is countering the nerves surrounding the spread of the virus. Markets are, instead, trading ina post covid environment in so much that investors are looking through the risks.
”A slump in investment flows to the yellow metal, catalyzed by the election uncertainty which cascaded to deflationary forces from potential Covid-19 lockdowns and a reversal in safe-haven flows from the vaccine announcement,” analysts at TD Securities explained.
Pfizer PFE shares gained 2.14% after the drugmaker said its COVID-19vaccine was 95% effective and the company would apply for emergency US authorization within days.
The announcement comes in the wake of a similar report from Moderna last week that had announced a 90% effectiveness of its own vaccine candidate.
”We reiterate that the vaccine will ultimately be a boon for gold bugs, helping strengthen inflation expectations without immediate implications for central bank policy.
Fedspeak and central bank speeches have recently implied as much, but the resulting implications for gold prices have yet to be priced,” analysts at TD Securities argued.
US data back in a bright spot
Meanwhile, on the data front, we have seen that US homebuilding has shown the housing market continues to be a bright spot even as other parts of the economy are showing signs of strain from rising coronavirus cases.
Eyes on the Fed
Looking forward, there will be a focus on the next Federal Reserve meeting in December in a post-US election world. the focus will be on the challenges ahead for the US economy grappling to get back on track with a vaccine on the horizon. This is where gold could flourish, acting to analysts at TD Securities.
”The Fed’s continued attempt to spark higher inflation expectations should suppress real rates deeper into negative territory. This will continue to drive investment appetite for precious metals, as capital seeks to shelter itself from increasingly negative real rates. ”
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