Gold futures are underperforming so far this Wednesday, but are slowly making headway on a stronger US dollar and a slight gain in US equity indices.
With America on a bank holiday due to Veterans Day, there may not be a brake on the Treasury futures market today. This may be responsible for the early bilateral trade. This could be limiting the movement of gold, as Treasury bond yields have been controlling the direction of the US dollar all week.
At 12:59 GMT, December Comex gold futures are trading at $ 1870.50, down 5.90 or -0.31%.
Despite moving lower, gold prices have been relatively stable compared to Monday’s volatile downdraft. That $ 90 loss was fueled by the surprise announcement of a very successful coronavirus vaccine trial, while today’s price action is fueled by concerns about the launch of the potential COVID-19 vaccine.
Midweek Summary
Gold futures tumbled as much as 5.2% on Monday after drugmaker Pfizer said its COVID-19 vaccine was more than 90% effective based on initial test results, and the resulting optimism continues to drive a strong rally in stocks. The news also pushed investors out of safe-haven Treasury securities, pushing yields to their highest levels since March. The higher yields made the US dollar a more attractive asset, putting pressure on foreign demand for dollar-denominated gold.
Daily forecast
Gold futures could continue to form a support base on Wednesday as the tug of war between the bulls and bears persists.
The bulls cite accommodative central banks and expectations of additional stimulus as key reasons for wanting to hold gold and even buy more at current price levels. Meanwhile, bears feel that gold has more downside potential as investors start investing more money in higher-yielding assets.
Confidence in newly elected president Joe Biden and the possibility of a reopening of the economy earlier than expected are also responsible for the weakness of gold this week.
However, since it may take months before the vaccine is available for public use, questions are beginning to resurface as to whether the pandemic will be tamed before slightly derailing the global economic recovery. This idea provides some support for gold prices.
Federal Reserve lawmakers said Tuesday that rising coronavirus cases threatened to slow down U.S. growth again in the coming months and that more targeted fiscal support from the government was needed.
A base of support could be formed if investors, betting on more fiscal and monetary stimulus, continue to buy gold. However, profits could be limited if the vaccine is successful in stopping the spread of COVID-19.
