The vaccine volatility dust has settled and Gold is holding above 1,850 USD

November 18, 2020

After the massive sell off on Monday, the 09th, Gold droped more than 100 USD/ounce after Pfizer/BioNTech announced that they are on their way to a Covid-19 vaccine they claimed is effective in preventing over 90% of virus cases. This resulted in a spike in 10 year US yields to nearly 1% (and thus to their highest levels since June).

On Monday, the 16th, we got to see a near repeat of the week before, this time from Moderna: the phase 3 study met statistical criteria with a vaccine efficacy of 94.5% (P < 0.0001). And what is probably even more interesting than last week’s Pfizer/Biontech news: Moderna announced a longer shelf life for its COVID-19 vaccine candidate at refrigerated temperatures.

The difference this time? Gold initially sold off, but quickly recovered its daily losses, closing the day nearly unchanged.

Our interpretation of that move is that since the initial volatility dust has settled, market participants are realizing that a vaccine alone won’t cut it and that we are still far away from returning to “normal”, especially from an economic standpoint.

That said, we recall what we already pointed out several times in the past now: the chance of a massive fiscal package from the US government, as well as from European countries after the recent lockdowns, to stabilize the global economy and an ultra-dovish approach from central banks around the globe, especially from the FED to finance that “fresh” debt. This is still on the table.

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That in mind, leaves us with a positive bias for Gold in the weeks and months to come.

While technically, a break below 1,850 USD would be short-term bearish, risk-reward wise such a push lower would be really interesting, with the yellow metal entering a very bullish seasonal window in December and January.

But it remains to be seen if we get to see such a bearish attack at all: recapturing the 1,900 USD mark and a quick push back above 1,930 USD could result in another dynamic attempt to break above 1,975 USD with a follow through back above 2,000 USD to be expected:

Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (from July 03, 2019, to November 17, 2020). Accessed: November 17, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of Gold fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, and in 2019, it increased by 18.9%, meaning that in five years, it was up by 28%.

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