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James Hyerczyk
Comex Gold

Gold is plunging on Friday, the feather in the cap of its worst weekly decline in two months, as hopes for a virus vaccine and a rebound in economic growth dulled demand for the so-called safe-haven asset. The market started out weak but a break through the psychological $1800 level that had held for three sessions, triggered a slew of sell-stops that fueled the steep decline.

At 11:59 GMT, February Comex gold is trading $1780.80, down $33.40 or -1.84%.

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Vaccine Hopes Weigh on Demand Despite Some Concerns

Earlier in the week, AstraZeneca announced that its COVID-19 vaccine could be up to 90% effective, adding to successful trial results of Pfizer and Moderna Inc under development in the fight to end the worst pandemic in a century.

However, former pharmaceutical executives in the U.S. raised questions this week over the Oxford-AstraZeneca vaccine candidate. “We believe that this product will never be licensed in the U.S.,” one group of critical U.S.-based analysts wrote this week.

However, President Donald Trump said Thursday evening that coronavirus vaccine deliveries will begin as early as next week.

“The whole world is suffering and we are rounding the curve,” Trump said. “And the vaccines are being delivered next week or the week after.”

Trump also noted that front-line workers, medical personnel and senior citizens would be the vaccine’s first recipients.

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China’s Industrial Profits Grow at Quickest Monthly Pace Since Early 2017

Gold futures were also pressured by a rebound in economic growth in China.

Profits at China’s industrial firms grew in October for a sixth consecutive month and at their quickest pace since early 2017, pointing to a steady recovery in the manufacturing sector after it was hard hit by the COVID-19 pandemic.

Profits at Chinese industrial firms surged 28.2% year-on-year in October to 642.91 billion yuan ($97.79 billion), National Bureau of Statistics (NBS) data showed on Friday, after rising 10.1% in September versus the previous year.

Short-Term Outlook

Once again, gold is being influenced by the clash between the short-term and long-term fundamentals. Short-term traders who bet on fiscal stimulus are feeling pressure because the creation of the vaccine means the economy could recover faster than expected, dampening the need for a massive fiscal stimulus package. Additionally, short-term traders expecting a fight for the White House by President Trump are being crushed by hopes for a smoother transition to a Biden administration.

Over the long-run, however, gold remains well-supported given its lure as a hedge against likely inflation and currency debasement spurred by unprecedented monetary stimulus measures globally. Those buying into the longer-term outlook base their assessment on the Federal Reserve capping gains in the longer end of the yield curve and a weaker U.S. Dollar.

But with the yield curve steepening and investors dumping gold ETFs, we’re just not quite in a sweet spot, value area yet.

For a look at all of today’s economic events, check out our economic calendar.
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