Vaccine bubble may fizzle out soon

 Precious metals are heading for the first quarterly loss since 2018. Optimism surrounding vaccines and signs of recovery have dampened the demand for gold as a safe haven asset. Even as leading central banks continue to offer support for economies, the lustre on gold seemed to be little faded on Monday. This week, investors will keep a close watch on the Federal Reserve’s final meeting of the year, with markets widely expecting fresh guidance on its asset-purchase program.

It must be noted that gold prices have recorded year-to-date surge of 22%. This is despite the recent sharp fall in prices during the past month, when it had retreated almost 15%, compared with the highs recorded in the month of August.

Gold turned bearish in the second week of August, following a major bullish trend which lasted for a couple of years. This year, the bullish trend picked up further speed, due to the Coronavirus and the global economic recession, which turned traders towards safe havens.

But the bearish reversal came in August, and gold has been declining since them, pulling down silver as well, where we have an open sell forex signal

The gold prices witnessed phenomenal jump, mainly triggered by global economic concerns triggered by the rapid spread of Covid-19 pandemic. The optimism surrounding the vaccines against the virus has resulted in a rally in global stock indices, suggesting the chances of economic revival. However, it remains unsure as to when the vaccine could reach the entire population of the world. Also, its effectiveness continues to remain as a big question.

Gold prices fell 1% on Monday as hopefulness for a faster economic recovery got an incentive from the forthcoming release of COVID-19 vaccines in the United States, but hopes for further fiscal and monetary stimulus capped bullion's losses. Spot gold fell 0.9% to $1,822.90 per ounce during Monday’s trading session.

Gold was seen weakening over gradual global recovery, strengthening European equities, an extension of Brexit trade talks and with the vaccination of U.S. citizens with a COVID-19 vaccine. But, limiting gold's losses were reports of a $908 billion U.S. COVID-19 relief plan that could be introduced as early as Monday after a leading Democrat lawmaker suggested his party might be willing to reach a compromise.  

With the Fed’s intentions to ease policy by increasing the average maturity weighting of its Treasury purchases following the December FOMC meeting, gold enthusiasts may not need to wait much longer for a convincing move higher. 

Gold benefits from its appeal as a hedge against inflation that could result from the unprecedented stimulus unleashed in 2020. Analysts across the world, told gold dealers in India and investors now await the U.S Federal Reserve's two-day policy meeting starting on Tuesday.  

The vaccine bubble is going to fizzle out soon as things will take lot of time for complete implementations worldwide. There is a big IF among the vaccine takers, as its side effects rumours are gripping and that might place doubts in the mind of general masses. This could possible trigger gold. 

RiddiSiddhi Bullion Limited officials offered optimism and said that gold could rally in 2021 when the vaccine optimism dies down and investors’ focus returns to rising inflation expectations due to the large swathe of monetary and fiscal stimulus the U.S. economy still requires.

Stimulus for economy boosts gold prices too RSBL

 After a weak November, gold once again strengthened this month over varied reasons. Gold recovered more than 5% since slumping to a five-month low on Nov. 30, with November also marking bullion's worst month in four years, pressured by hopes of a vaccine-fuelled economic recovery.  

Gold is revering from one of its most fierce sell-offs ever, after new breakthroughs in COVID-19 vaccines and their possible availability before the year end caused a run on money in safe-havens.

 November was the worst month for gold in this year. The yellow metal lost about 6% of its value in November, its most for a month since 2016 and fell into $1,700 territory. Investors have in recent weeks directed money mostly into stock markets and other risk assets such as oil, as those witnessed an epic rally amid the notion that vaccines and therapeutics would soon bring an end to the spread of the corona virus.

But December came in as a surprise for gold. Gold gained more than 1% to a two-week high on Monday, augmented by prospect of fresh fiscal stimulus in the United States. Despite the continued emphasis on risk, gold as a haven is rallying again on talk of a new U.S. Covid-19 stimulus efforts. Monday’s rally in gold was reignited by Congress’ aim to scrape together a corona virus relief package before the end of this week and prevent a lapse of benefits that could send millions of Americans spiralling further into financial peril at the end of the year.

Gold prices resumed their run higher, picking up from last week’s three-day rally, on signs that U.S. lawmakers were closing in on a fiscal deal to keep the government open and continue with pay check protection for millions of Americans stressed by the Covid-19. U.S. lawmakers sought to hammer out an agreement on infusing long-awaited relief through a $908 billion Covid relief package soon. 

Analysts and top gold dealers all around the world agreed that lawmakers aim to pass both pandemic aid and spending legislation before the government shuts down on Saturday. They will have to quickly resolve several sticking points to meet the deadline.

Democrats, who control the House of Representatives, have backed the plan as the basis for an emergency relief bill as a sustained Covid-19 infection surge stresses hospitals across the country. Republicans, who have a majority in the Senate, have indicated they will support the measure without specifying how much exactly in dollars and cents. Fresh restrictions might also we witnessed. 

The stimulus plan has helped stabilize the gold market because more money being pumped into the financial system is inflationary.

Gold prices typically rally in any stimulus or monetary expansion exercise.

Any kind of stimulus measure will result in rising inflation. And time and again gold has always been considered as a hedge against inflation. Any such situation will result in a rise in gold prices which has already gained 22% so far this year.

Apart from the stimulus package, important data was also released and many important numbers are yet to come this week. The US payrolls data had mixed statistics. While employment rates improved, there was dip in overall monthly payrolls compared to expectations. Now the falling USD at 90.7 is supporting precious metals. As mentioned last week by industry and RSBL spokesperson that gold at $1850-185, a crucial barrier and even in Friday it attempted $1852 and gave up later.  Gold made a good bounce back on Monday, hitting the precise $1865 and MCX above 50,000 in rupee terms. Gold looks positive and traders are still looking for dips to buy.

Furthermore, the US- Sino tiff continued as the United States imposed sanctions and a travel ban on 14 Chinese officials over their alleged role in Beijing's disqualification of elected opposition legislators in Hong Kong. Meanwhile, Britain was set to become the first country to roll out the Pfizer/BioNTech COVID-19 vaccine this week.

Historically, a rise in uncertainty and fear is the single biggest factor that leads to a spike in prices of gold as central banks increase the pace of gold purchase. If uncertainty around the pandemic propelled prices beyond Rs 57,000 per 10 grams in August (from around Rs 40,000 in January 2020), it should be remembered that it is not yet over, and is certainly not the last risk the world will see. Gold prices get impacted by several factors including geopolitical tensions, interest rate movements and change in value of the dollar with respect to other currencies.