Price of Gold Fundamental Daily Forecast – Bulls Want More Stimulus, Bears Betting on Successful Vaccine

Gold futures are putting in a limited performance so far on Wednesday, but inching lower on a stronger U.S. Dollar and slight gain in the U.S. stock indexes.

With the U.S. on a bank holiday due to Veteran’s Day, there may not be a stopper in the Treasury futures market today. This may be responsible for the early two-sided trade. This could be limiting the movement in gold since Treasury yields have been controlling the direction of the U.S. Dollar all week.

At 12:59 GMT, December Comex gold futures are trading $1870.50, down 5.90 or -0.31%.

Despite moving lower, gold prices have actually held relatively steady when 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 being fueled by concerns over the roll-out of the potential COVID-19 vaccine.

Mid-Week Recap

Gold futures plunged as much as 5.2% on Monday after drugmaker Pfizer said its COVID-19 vaccine was more than 90% effective based on initial trial results, with the resultant optimism continuing to fuel a strong rally in equities. The news also drove investors out of the safe-haven Treasuries, pushing yields to their highest levels since March. Higher yields made the U.S. Dollar a more attractive asset, pressuring 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 the bears persists.

The bulls cite accommodative central banks and expectations of additional stimulus as key reasons to want to hold gold and even buy more at current price levels. Meanwhile, the bears feel that gold has more downside potential as investors start to put more money into higher-yielding assets.

Confidence in newly elected president Joe Biden and the potential for a sooner-than-expected reopening of the economy are also responsible for gold’s weakness this week.

However, since it may take months before the vaccine will become available for public use, doubts are beginning to resurface over whether the pandemic will be tamed before slightly derailing the global economic recovery. This idea is providing some support for gold prices.

Federal Reserve policymakers said Tuesday that surging coronavirus cases threatened to slow U.S. growth again in coming months and that more targeted fiscal support from the government was needed.

A support base could form if investors, betting on more fiscal and monetary stimulus, continue to buy gold. However, gains could be capped if the vaccine is successful in stopping the spread of COVID-19.