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Gold Slumps on Economic Optimism As COVID-19 Vaccine Rollout Begins

December 14, 2020 at 18:55 by Andrew Moran

Gold futures are slumping to kick off the trading week, driven by greater economic optimism as the coronavirus vaccine rollout begins. With the COVID-19 inoculation campaign starting, investors’ risk appetite is intensifying heading into 2021. If the economic recovery proceeds as expected, does this spell the end of the metal market’s incredible bull run in 2020?

January gold futures tumbled $10.50, or 0.57%, to $1,833.10 per ounce at 17:32 GMT on Monday on the COMEX division of the New York Mercantile Exchange. The yellow metal is coming off a tepid weekly gain of about 0.2%, bringing its year-to-date rally to around 21%.

Silver, the sister commodity to gold, erased its intraday gains to start the trading week. February silver futures slipped $0.047, or 0.2%, to $24.045 per ounce. The white metal fell nearly 1% last week, but it is still up 35% in 2020.

As the US and the rest of the developed world roll out the COVID-19 vaccines, investors are optimistic in the broader financial markets, banking on a historic economic recovery next year. Although coronavirus cases are skyrocketing in the US, nearing close to 280,000 cases per day, market observers are confident that there is light at the end of the tunnel.

The US has reported more than 16.7 million confirmed cases, with a death toll of 306,000. Globally, there have been 73 million infections and about 1.61 million deaths.

A sliding greenback is easing some of the selloff pressure on Monday. The US Dollar Index, which measures the greenback against a basket of currencies, fell 0.32% to 90.69, from an opening of 90.76. The index has declined 6% year-to-date, plummeting roughly 16% since hitting a peak of 103.00 this past spring. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to buy.

Gold also limited its losses on Washington’s higher odds of passing a $908 billion COVID-19 relief package. US lawmakers have introduced a midnight Friday deadline. Fiscal spending has increased inflation fears, evident in the precious metals’ performance anytime there is an announcement of a pending deal.

Gold markets are also keeping an eye on the Federal Reserve‘s final Federal Open Market Committee (FOMC) policy meeting of 2020 beginning on Tuesday. This could be a critical meeting since the central bank will decide on its medium-term lending facilities (MLF) that are set to expire at the end of the month.

In other metal markets, January copper futures dipped $0.003, or 0.09%, to $3.525 per pound. January platinum futures dropped $7.10, or 0.69%, to $1,014.70 an ounce. January palladium futures slid $15.60, or 0.67%, to $2,317.50 an ounce.

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

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