Pfizer’s New Vaccine Against Covid-19: How Does Gold React?

Pfizer’s New Vaccine Against Covid-19: How Does Gold React?

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Key Takeaways:

• How did the news of Pfizer’s new vaccine affect Gold?
• What caused the value of Gold to fluctuate?
• What are the implications of this vaccine for the Gold metal?

Yesterday, gold skittered down below $1,850 after the news broke out that Pfizer has a vaccine candidate against Covid-19. The vaccine has proven to be 90% effective. Other pharmaceutical companies are also using similar methods to discover a cure against the Coronavirus. This raises the probability of having immunization as soon as the first half of next year. The scientific breakthrough of a vaccine that could be available in the coming months is a victory in a pandemic-stricken world.

How did the News of Pfizer’s New Vaccine Affect Gold?

Pfizer and Germany’s BioNTech are currently in the third phase of the trial. So far results have shown the vaccine prevents 90% of infections and there are no serious or threatening side effects identified so far. Phase 3 of the trial has tested over 43,000 people. Even though Pfizer intends to request emergency approval and promises 50 million doses for the months of November and December 2020, and over one billion for 2021, regulators say it will take “many months” before a vaccine is officially available.

Once the news was announced, Gold fell from its high of $1,965 to a low of $1,949.40, marking its biggest one-day loss in 7 years. The precious metal reached a six-week low since the price was last sub-$1,950 on Sep 28.

What Caused the Value of Gold to Fluctuate?

The aggressive selling wave that occurred in Gold was the adverse effect of investors rushing to buy equities and whole benchmark indexes. Some of the indexes such as the S&P500 registered highs of nearly 5%, along with Oil which went up from $40.05 to $43.46 for the day.

The risk-on transition to riskier assets that occurred in the markets after the announcement, proved to be a quick and rather unstable move that could be difficult to sustain. The Dow Jones Index, for example, came off its highs relatively soon after the opening bell. The benchmark index reached a high of 29,757, and closed at 29,157. Oil continues to trade positively after yesterday’s close of 41.97, currently at 43.09.

Today, European markets and US equity futures are relatively unchanged compared to Monday closing levels. While equities experience a pullback, the yellow metal is trying to recoup its losses. The precious metal reached a high of $1,890 earlier today and is currently trading at $1,880. Tuesday opening price was $1,864 with a low of $1,860.

What are the Implications of this Vaccine for the Gold Metal?

The implication after the news is that in the case that we receive a Covid-19 vaccine, there would be a diminished need for fiscal stimulus to support the recovery in the short-term. With the economic recovery not threatened by an out-of-control virus, people can get back to work and return to a more sociable life. Even though this news is good, it is unclear whether investors will be able to uphold the market in the months ahead before the official release of a Covid-19 vaccine.

On the technical front, Gold breached the 100-day and 50-day Moving Average and went to form a double bottom with the previously reached level of $1,848.45 on Sep 28. In the medium-term, Gold continues to trade in a horizontal range of $1,960 to $1,850. In the immediate term, Gold bugs may experience heightened volatility due to the uncertain outlook of scientific achievement.

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