By David Brough
Positive news about vaccines development has dragged on gold prices by diminishing the “safe haven” appeal of the yellow metal.
However, gold prices are likely to be buoyed by continuing rising numbers of coronavirus cases and expectations that it will take a long time for global economies to pick up again.
Gold sold off below key support at $1,800 per ounce on November 27, and hit its lowest since July 6.
“Gold prices have been declining since November 9, and that trend seems set to continue in the short term,” wrote consultancy CPM Group.
“Positive news on Covid vaccines and the U.S. election drama, mostly behind the market is creating a risk-on environment that has pushed (gold) prices down as investors backed away.”
Gold’s slide may be limited by expectations of a big U.S. stimulus package to safeguard Americans whose livelihoods were devastated by the crisis.
Stimulus measures will stoke fears over inflation, boosting the appeal of gold which is seen as a hedge against rising prices.
“It would seem that vaccine optimists may be getting out of gold in the expectation that economic growth may start to return to normal once a mass vaccination programme is implemented,” wrote Lawrie Williams, gold market commentator with bullion dealer Sharps Pixley.
“However, as we note below, hopes of a speedy vaccine rollout and a rapid return to anywhere near normality may still be months, if not years, away yet and once this realisation sinks in the effects on equities (negative) and gold (positive) could well begin to influence the overall picture.”
Disclaimer: Any opinions expressed in this column are solely those of the author and should not be considered as investment advice.
Credit: Kimjoux Kore Faceted Signet Ring
