Gold bulls take a big hit on vaccine headlines – 2,000 USD off the table?
Source: Economic Events November 11, 2020 - Admiral Markets Forex Calendar
On one hand, we were initially right on our latest expectation for Gold. In our last technical piece for Gold last week, we wrote that the true winner of the US presidential election would be a member of neither the democratic or republican party, but the yellow metal: Gold. However, the tide turned dramatically on Monday after Pfizer/BioNTech announced that they are on their way to a Covid-19 vaccine that is said to be effective in preventing the virus in over 90% of cases.
As a result, US yields sharply rose with market participants seeing chances of a massive fiscal stimulus plan dropping. But we are not yet convinced that this news is a real game-changer.
In the Pfizer trial, there were 43,358 people involved, 50% of whom received the vaccine and 50% of whom received a placebo. Upon its first analysis of participants, of the 43,358 patients, 94 contracted Covid-19. Pfizer claims that the efficacy rate of the vaccine is above 90%.
While the first signs are definitely positive, we are still convinced that we are far from returning to "normal", especially from an economic perspective. As we already pointed out several times in the past (e.g. here), chances of a massive fiscal package to stabilize the US economy and an ultra-dovish approach from the US central bank FED to finance that fresh US debt is likely still on the table, which was underlined by FED chairman Powell last week on Wednesday saying that the FED hasn't considered slowing the $120 billion per-month pace of bond-buying.
That in mind, leaves us in a very difficult spot right now:
- The Gold daily chart, technically, looks ugly after the failed attempt to break above 1,975 USD
- Gold fell straight down to 1,850 USD in one daily candle, leaving an increased chance of a near-term test of 1,800 USD and drop even lower (target around 1,745/750 USD) on the table
- The next US government, (most likely democratic, but depending on the legal developments) has no other choice than to deliver a massive fiscal stimulus package, financed with freshly printed US-Dollar
However, a stimulus plan should create an overall favorable and bullish environment for the precious metal, since vaccine hopes and, lastly, a vaccine won't spur the demand needed to initiate higher consumption and economic growth, in general.
In addition to that, Gold finds itself in quite a positive position for Long engagements, risk-reward wise: the precious metal is about to enter a historically known seasonal bullish window in December and January which could drive the price of the yellow metal back towards 2,000 USD.
Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (from June 26, 2019, to November 10, 2020). Accessed: November 10, 2020, at 05:30 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%.
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level than with MetaTrader 4. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.