Price of Gold Fundamental Daily Forecast – Sharp Rise in Risky Assets Shakes Up Gold Market

Gold futures plunged more than 4% on Monday as news of the first successful late-stage COVID-19 vaccine trials encouraged investors to buy higher-yielding assets like the U.S. Dollar. This drove down demand for dollar-denominated gold. Earlier in the session, gold edged higher amid a weaker dollar and hopes for more stimulus following Joe Biden’s victory in the U.S. elections.

At 17:44 GMT, December Comex gold is trading $1861.00, down $90.70 or -4.77%.

Demand for Higher-Risk Assets Surges

Equities jumped after Pfizer Inc said its experimental COVID-19 vaccine was more than 90% effective. Pfizer and German partner BioNTech SE said they expect to seek U.S. emergency use authorization later this month.

Along with the surge in stock prices, U.S. Treasury yields leaped on Monday following news from Pfizer. This made the U.S. Dollar a more attractive investment to the detriment of gold.

The yield on the 10-year Treasury note jumped 13 basis points to 0.95%. The benchmark rate touched a high of 0.975%, its highest level since March 20. The yield on the 30-year Treasury bond climbed 15 basis points to 1.742%.

Risk Sentiment Driven by Biden Win

Clarity on the political front also helped boost risk sentiment. Democrat Joe Biden defeated incumbent Republican President Donald Trump in the U.S. presidential election race, according to NBC New projections. The call came four days after Election Day and amid close counts in several battleground states.

Short-Term Outlook

The news from Pfizer is bullish for the U.S. Dollar because it could mean the economy recovers faster than expected. This would diminish the need for massive fiscal stimulus from the government and the continuation of the emergency aid program from the U.S. Federal Reserve.

“As stock markets rally around the world on the news, bond markets will sell off, driving yields higher and that will cause a repricing across all asset classes,” Chris Zaccarelli, chief investment at Independent Advisor Alliance, said in a note.

Basically, investors are saying, if the economy recovers and higher yielding assets risk then who needs to buy gold.

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