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Gold Crashes 5% As Pfizer Announces COVID-19 Vaccine, Financial Markets Soar

November 9, 2020 at 20:03 by Andrew Moran

Gold futures are crashing to kick off the trading week, driven by the announcement that a leading drug manufacturer has developed a coronavirus vaccine that is 90% effective. The news sparked a tremendous rally in the financial markets, resulting in the worst selloff of gold since the height of the market meltdown earlier this year. Is this the end of gold’s rally, or a buying opportunity?

December gold futures plummeted $87.00, or 4.46%, to $1,864.70 per ounce at 19:01 GMT on Monday on the COMEX division of the New York Mercantile Exchange. This is the worst single-day selloff in more than seven months, paring the yellow metal’s year-to-date gain to below 23%.

Silver, the sister commodity to gold, is also cratering on the news. January silver futures plunged $1.627, or 6.34%, to $24.035 per ounce. The white metal has slashed its 2020 gain to around 34%.

On Monday, Pfizer and BioNTech announced that they have developed a coronavirus vaccine that is 90% effective and that they will be applying to the US Food and Drug Administration (FDA) for emergency authorization usage once they have compiled two months of data. They plan to produce up to 50 million doses this year and up to 1.3 billion doses next year. The inoculation will require two doses.

Most market observers had agreed that the news of a vaccine would be bearish in the short-term for gold prices since it would likely boost stock prices and help the global economic recovery. In addition, the 2020 US presidential election provided more certainty than expected, leading to Joe Biden soon to be officially announced as the President-Elect. Gold markets are still betting on higher inflation in a Biden administration because he is expected to spend more over the course of his term. Some analysts anticipate a so-called mega stimulus following Inauguration Day 2021.

A strengthening US dollar weighed on the metals market, with the US Dollar Index, which gauges the greenback against a basket of currencies, skyrocketed 0.61% to 92.79. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase. The rally in the index on Monday reduced its YTD loss to below 4%.

The bond market advanced on Monday. The benchmark 10-year Treasury yield rose to 0.952%. A higher yield can make non-yielding bullion less attractive in the financial markets.

Does this mean gold prices will not be testing $2,000 next year? The consensus is that the Federal Reserve‘s inflationary monetary policy and the government’s fiscal spending will remain the same, so gold could experience a pullback this year and then head toward $2,000 again.

In other metal assets, December copper futures were flat at $3.154 per pound. January platinum futures fell $27.40, or 3.05%, to $872.00 per ounce. December palladium futures were unchanged at $2,499.10 an ounce.

If you have any questions and comments on commodities today, use the form below to reply.

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