Price of Gold Fundamental Daily Forecast – Underpinned as Vaccine Hopes Fade, Yields Fall

Gold futures are inching higher on Friday after consolidating for three days following a more than $90 plunge on Monday. Fears over the economic fallout from surging coronavirus cases are providing the support, but it’s probably not going to be enough to prevent the market’s biggest weekly loss since September. Triggering the steep sell-off on Monday was positive news about a potential COVID-19 vaccine.

At 14:18 GMT, December Comex gold is trading $1893.20, up $19.90 or +1.06%.

A dip in U.S. Treasury yields and a lower U.S. Dollar are helping to underpin dollar-denominated gold, while a rise in U.S. equity markets may be capping gains.

Comments from Federal Reserve Chairman Jerome Powell on Thursday indicate the central bank is going to remain accommodative for as long as necessary, however, Powell also emphasized the need for more fiscal stimulus despite the positive vaccine results.

Dollar Falls as Vaccine Boost Fades

The U.S. Dollar slipped on Friday and risk appetite in currency markets eased, as worries about the economic fallout from surging COVID-19 cases in Europe and the United States tempered initial enthusiasm about a possible vaccine.

Global markets surged on Monday after Pfizer Inc said its experimental vaccine is more than 90% effective – news which saw the dollar rise as traders quit their long-Yen positions.

Treasury Yields Slump as Coronavirus Cases Surge

U.S. Treasury yields fell on Friday as confirmed cases of the coronavirus in the U.S. reached a record high on Thursday. The yield on the benchmark 10-year Treasury note sunk to 0.882%, while the yield on the 30-year Treasury bond fell to 1.635%.

The drop in yields is making the U.S. Dollar a less-desirable investment, this is helping to drive up demand for dollar-denominated gold.

Fed’s Powell Worried About Long-Term Impacts from Coronavirus Pandemic

Federal Reserve Chairman Jerome Powell said Thursday he worries about women, children and business owners who face long-term consequences from the coronavirus pandemic.

Powell also warned that the “next few months could be challenging” as the virus continued to spread.

The Fed Chair also said he expects that more policy help will be needed from both the Fed and Congress.

Daily Forecast

On Monday, we saw what is likely to happen to gold if a vaccine program is successful and the economy returns to pre-pandemic levels. At the lows, however, we also saw the impact of an accommodative Fed. Now all we need to see is help from the government, but it’s been impossible to guess if and when it’s coming. A month ago, I thought we’d get fiscal stimulus before the election then I thought it would come shortly after the election. I don’t have a guess at this time.

Gold is likely to be capped because no one is certain about the timing of fiscal stimulus, but monetary stimulus will remain supportive.