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Market News Vaccine is coming and gold is frightened. Why analysts are still optimistic about gold?

Vaccine is coming and gold is frightened. Why analysts are still optimistic about gold?

Because the US is about to launch a vaccine to ease risk aversion, the price of gold futures closed down and fell for the second consecutive day.

Eden
2020-12-11
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February gold futures prices fell 1.10 US dollars, or nearly 0.1%, to close at 1837.40 US dollars per ounce, which continued to be the lowest point since December 2.


The United States is waiting for the Food and Drug Administration (FDA) to review the results of the new crown vaccine jointly developed by Pfizer (PEF-US) and Germany’s BioNTech (BNTX-US). The UK has launched the new crown vaccine on Tuesday.


On Thursday, the European Central Bank expanded its stimulus measures to counter the economic blow to the economy from the rebound of the epidemic. The measures made gold rise in early trading, but the market expected that the FDA will approve the emergency use of the vaccine, which offset the early gains in gold on Thursday. Chintan Karnani, chief market analyst at Insignia Consultants, said, “The vaccine news is bad for gold.”


Vaccine progress has brought prospects for economic recovery, reducing investors' demand for gold and other hedging tools. At the same time, governments are expected to increase expenditures to combat economic losses, supporting gold prices.


In addition to the financial relief program that supported the price of gold, data on the number of weekly unemployment claims in the United States also pushed up the price of gold, as the number of applicants surged by 137,000 last week, reaching a nearly three-month high of 853,000.


However, due to the unsatisfactory second round of stimulus negotiations in the United States, gold was also under selling pressure on Wednesday. Naeem Aslam, chief market analyst at AvaTrade, said, “The stimulus package has not been seen for a long time, which means that the U.S. economy is at great risk, because companies are struggling to survive due to the surge in new crown cases. In view of this, it is possible to sell gold at the current level. Not the best strategy because investors may withdraw from risky assets.”


Wells Fargo: Gold price will rise to US$2100 by the end of next year

At the 2021 outlook discussion meeting, Wells Fargo analysts predicted that gold prices will still have great potential for growth next year. The bank predicts that by the end of next year, the price of gold will rise to US$2,100 to US$2,200.


John LaForge, head of real estate strategy at Wells Fargo, pointed out that although the economy is recovering strongly, he expects low interest rates and loose monetary policies to continue to support gold, silver and platinum. "There is still a lot of liquidity in the market, which is good for gold and silver."


Although Wells Fargo is bullish on the outlook for gold as a whole, it does not mean that it is risk-free. Wells Fargo said that the biggest obstacle facing gold and silver next year may be the rise in interest rates. The bank expects inflationary pressures to remain below 2%, so any increase in nominal yields may lead to an increase in real yields, which will be negative for gold.


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