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Gold Plunges 1% on Stock Market Rally, COVID-19 Vaccine Candidate

May 18, 2020 at 17:26 by Andrew Moran

Gold futures are slumping more than 1% on Monday as the US stock market rallies to kick off the trading week. The yellow metal had been trading at its best level in one month on bearish sentiment and inflation concerns, but after the US central bank suggested a vaccine will be the only way to initiate a recovery, investors hit the buy button.

June gold futures tumbled $22.30, or 1.27%, to $1,734.00 per ounce at 16:59 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold prices just came off a 3% weekly increase, bringing their year-to-date gains to around 15%.

Silver, the sister commodity to gold, is maintaining the momentum it had at the start of the trading session. July silver futures rose $0.31, or 1.82%, to $17.38 per ounce. The white metal surged 8% last week and shed much of its 2020 decline.

The metals market failed to take advantage of the huge drop in the greenback. The US Dollar Index, which measures the buck against a basket of currencies, cratered 0.67% to 99.73, from an opening of 100.40. The dollar had been soaring over the last month as traders poured into the traditional safe-haven asset amid global market uncertainty. A weaker buck is usually good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

Federal Reserve Chair Jerome Powell warned over the weekend that the economic recovery will only happen once a COVID-19 vaccine is developed. A day after he made these remarks, Moderna announced that it has seen positive data and promising results from its early-stage coronavirus vaccine trial.

He also noted that the economy will likely require additional government support for businesses and households for the next six months. What added to market’s bullishness on Monday was his comment about unlimited interventions by the US central bank during and after the COVID-19 pandemic. Powell told CBS’ 60 Minutes:

We’re not out of ammunition by a long shot.

The extreme volatility has subsided since the Fed unleashed quantitative easing infinity, pledging to buy any and all assets that are in trouble. The Eccles Building has expanded its purchasing initiatives to corporate bond exchange-traded funds (ETFs), as well as state and municipal debt. During last week’s press conference, Powell left the door open for further monetary stimulus. The Fed’s balance sheet has risen to just under $7 trillion, and analysts are projecting it will balloon to $10 trillion by the end of the year.

In other metal markets, June copper futures rallied $0.0735, or 3.15%, to $2.404 per pound. June platinum futures tacked on $51.20, or 6.27%, to $868.30 an ounce. June palladium futures soared $172.80, or 9.3%, to $2,030.70 per ounce.

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