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  • News surrounding developments towards a COVID-19 vaccine sunk gold.
  • Underlying risks support gold, but TDS are not expecting gold to break materially higher just yet.

Gold prices ended lower on Monday as markets flipped risk-on pertaining to some upbeat news surrounding developments towards a COVID-19 vaccine. The price has steadied, however, and the move may have been nothing more than a flush-out of weak hands and stale stops. At the time of writing, gold is trading at $1,733 and is up 0.18%. The price gas has risen off a low of $1,730.18 and touched a high of $1,735.84. 

There are still plenty of underlying risks out there for markets to be concerned for, so while the good news is flowing, bulls could well be making the most of the dips. “We note that trend followers have grown their gold length in recent days amid normalizing volatility,” analysts at TD Securities have explained. But, the analysts also explain, “as Fed Chair Powell pushed back against negative rates, and near-term concerns about deflation remain, we are not expecting gold to break materially higher just yet.”

While the near term concerns clash force with long-term expectations that gold should perform particularly well amid extreme monetary inflation, our expectation remains that, when the dust settles, capital will seek to shelter itself from a prolonged period of negative real rates following the pandemic.

Signs of a vaccine breakthrough

Meanwhile, Biotechnology company Moderna Inc announced positive results from a Phase 1 clinical trial for its experimental mRNA coronavirus vaccine. 

The first coronavirus vaccine to be tested in people appears to be safe and able to stimulate an immune response against the virus, its manufacturer, Moderna, announced on Monday,

– The New York Times reported in recent trade. 

A phase 2 study has been granted expected to enrol an additional 600 volunteers — half older than 55 — to provide additional immunogenicity data. There are hops that in July the company will begin a Phase 3 study, aimed at showing that the vaccine can actually prevent disease. 

Trade wars simmering

While the signs of a vaccine and glimmers of hope in an economic pick up can support sentiment in the near term, the US President remains mused about eliminating the largest trading partnership in the world. The heat between the US and China has revived since US President Donald Trump blamed China for its handling of the coronavirus pandemic. US lawmakers are crafting proposals to push American companies to move operations or key suppliers out of China. If the United States indeed implements further administrative restrictions, then gold will be a favourite safe-haven play.

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