By David Brough
Gold steadied at the end of a week in which the yellow metal had fallen sharply triggered by optimism over a vaccine, but the price outlook looks increasingly volatile with coronavirus cases continuing to surge around the world.
Gold was down over three percent on the week at $1,889.16 per ounce, the biggest decline since September, as the vaccine news eroded the need for safe-haven investments.
The news that the Pfizer-backed vaccine was 90 percent-effective drove down gold prices on November 10 as some investors imagined a possible return to normal lives by the spring of next year, but policymakers warned of caution as a grim virus-stricken winter looms.
“The new virus vaccine hasn’t yet been approved for general use, although it’s obviously a hugely positive development,” wrote Lawrie Williams, gold market commentator for bullion dealer Sharps Pixley.
“But perhaps the euphoria over the possible control of the advance of the virus is still too early. Infections and deaths are still advancing.”
With President Trump still not conceding the U.S. election, uncertainty grips the outlook for an economic stimulus package to aid the plight of millions of Americans whose livelihoods have been devastated by coronavirus.
Gold bulls see the prospect of a bold stimulus package as key to a recovery in bullion prices. Such a package could bolster gold’s appeal as a hedge against inflation and currency debasement.
Further positive vaccine news from other developers in the weeks ahead, may serve to drag down gold prices again.
And gold’s outlook will be closely tied to the fate of the U.S. dollar, which edged up against a basket of currencies this week.
Disclaimer: Any opinions expressed in this column are solely those of the author and should not be considered as investment advice.
