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James Hyerczyk
Comex Gold

Gold futures settled sharply lower last week with most of the losses taking place in one session, while the rest of the week, the market attempted to claw back these losses.

The market plunged nearly 5% last Monday after Pfizer said its experimental COVID-19 vaccine was over 90% effective based on initial trial results. However, the vaccine optimism was tempered throughout the week by a spike in coronavirus cases in the United States and Europe.

A Reuters tally showed novel COVID-19 cases soared by more than 100% in 13 U.S. states in the past two weeks, while the global tally crossed 52.45 million, underpinning the need for more stimulus.

Last week, December Comex gold settled at $1886.20, $65.50 or -3.36%.

Despite the steep sell-off, gold prices remained underpinned by the prospect of continued monetary stimulus by the U.S. Federal Reserve and the hopes of fresh fiscal stimulus from the U.S. Government.

Beware of Companies Announcing Vaccine Results

Given the reaction in the market to the Pfizer news on Monday, gold investors have to be wary of other companies announcing trial data in the coming weeks. Any news touting a successful trial could put more pressure on gold prices.

In addition to the Pfizer vaccine news, Moderna said on Wednesday it has enough data for a first interim analysis of the late-stage trial of its experimental COVID-19 vaccine, which should help determine the vaccine’s efficacy.

The announcement from Moderna had little effect on gold prices because the skeptics are out there. Despite the huge stock market rally and gold market plunge last Monday, traders are now focusing on the many hurdles before vaccines get into widespread use and COVID-19 is brought under control.

According to Bloomberg, questions about production, distribution, and most important, the capability of the shot itself still need to be answered. Pfizer’s late-stage trial started less than four months ago, and how long the vaccine will confer protection is unknown.

“The key question still centers upon time, says Michael Kinch, a drop development expert and associate vice chancellor at Washington University in St. Louis. “Will time tell us that the protection remains useful for the larger population?

Bloomberg also added, “Pfizer’s coronavirus vaccine has shown more than 90% efficacy in early tests. But there will be shortages of any successful shot, so masks aren’t going away anytime soon.”

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Weekly Forecast

U.S. economic reports are going to have little impact on the gold market this week because all of those reports represent data accumulated prior to the current surge in the number of COVID-19 cases in the United States.

Instead investors should focus on Treasury yields and the U.S. Dollar. Rising yields could put pressure on gold prices while falling yields should provide support. If there is going to be surprise news, it’s likely to be about fiscal stimulus. This would be bullish for gold because it should drive down rates and the U.S. Dollar.

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