Pfizer says that an effective coronavirus vaccine is coming. Does this imply the end of gold’s bull market?

What a drop! On Monday (Nov 9), the price of gold (London P.M. Fix) plunged almost 4 percent, or 74 dollars from $1,941 to $1,867, as the chart below shows.

What happened? Well, on that day Pfizer announced a promising vaccine breakthrough, saying that that the vaccine it is working on with German biotechnology company BioNTech, could prevent more than 90 percent of infections. It is, of course, very good news for the world, if proven to be true. We don’t know that yet, as Pfizer hasn’t provided any detailed scientific data, so it’s all based on trust, and the announced results are just interim results – the trial will continue into December. Moreover, it will take some time to make the vaccine satisfactorily safe and widely available (and to convince people to get it). As Christine Lagarde, ECB President, reminded this week, “While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved”.
Hence, although the news is a reason for optimism, it should be a cautious optimism and not euphoria – there is still a long way to go before we return to normalcy (although it might be a ‘new normal’, not a pre-pandemic business as usual).
Nevertheless, equity investors welcomed the news. The stock indices soared. Well, it’s not surprising, as the prospect of a vaccine is a light at the end of the pandemic’s tunnel. Actually, it’s our only hope for beating the coronavirus and returning to normalcy. The vaccinations would mean that social distancing, lockdowns, and all the sanitary requirements that drag down social life and economic growth would no longer be necessary. The epidemic would be finally over.

Implications for Gold

What does the vaccine news imply for gold prices? Does it mean the end of the bullish trend in the gold market? Not necessarily. Of course it’s true that the pandemic greatly contributed to gold’s excellent performance in 2020, and the fact that investors are starting to consider an end to the pandemic is clearly negative for safe-haven assets such as gold.

However, the upward trend in the gold market started in 2019 (well before the pandemic) due to the dovish Fed’s monetary policy. The pandemic only accelerated gold’s journey north. Actually, gold reacted in a very bullish way not to the pandemic itself but to the monetary and fiscal response to the coronavirus. Therefore, the bull market should last as long as the US monetary policy and fiscal policy remain ultra-dovish, while real interest rates are likely to stay below zero sometime after the pandemic is over.

What’s important here is that the vaccine news doesn’t significantly change the macroeconomic outlook. Economic growth remains fragile, the central banks will remain accommodative, and the financial stimulus will finally arrive, adding to the already mammoth public debt.

Please just take a look at the chart below, which shows the number of new Covid-19 cases. As one can see, the epidemic is clearly getting out of control. It will negatively affect the economic growth in the last quarter of 2020, thereby spurring fresh actions of the Fed and the Treasury.

Surely, the vaccine news did affect the markets. It encouraged more risk appetite, so investors sold some governments bonds, which increased the bond yields as the chart below shows.

The real interest rates rose, hurting gold prices. However, we are skeptical whether we’re observing the return of interest rates to normalcy. In November the Fed paused, but it’s likely to provide more accommodation in the future, putting downward pressure on interest rates. The same applies to the ECB. As Lagarde said this week, the vaccine news would not stop the central bank from loosening policy in December. Hurray! Hence, from the fundamental point of view, the recent plunge was just a setback, not the end of the bull market.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports, and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. To enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet, and you are not on our gold mailing list yet, we urge you to sign up there as well for daily yellow metal updates. Sign up now!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Gold & Silver Trading Alerts.

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We know the results. Biden will be the next president of the United States. Will gold shine under him?

It was a very close race but we finally know the results: Joe Biden has been elected as the next President of the United States. He got 50.65 percent of nationwide votes, but in some states, he won by just a margin of several thousands of votes. Nevertheless, Biden won 290 electoral votes, so he will probably move to the White House in January. My guess is that the coronavirus pandemic helped Biden score a victory, as older Americans could believe that he will handle the epidemic better than Trump.

I wrote “probably”, as in some states we do not have yet the results from 100 percent of the state vote count. Moreover, Trump said on Saturday that “this election is far from over” and that he was cheated. Since the current president started challenging the election results this week, recounts in several states are likely.

However, Biden’s lead in the Electoral College is so large that reversal of the results is rather unlikely, as the recounts would have to reverse in at least two states. So, even if some mistakes or irregularities are found, they don’t have to affect the outcome.

Therefore, we assume that Biden will be the next POTUS and will assume office at the age of 79, the oldest in history. Meanwhile, Kamala Harris will become the Vice-President, and the first woman, the first Black American and the first American of Asian descent to carry that title.

In the House, the blue wave didn’t materialize. Although Democrats retained their majority, they lost some seats, as Republicans were able to reclaim several seats lost in the 2018 midterm elections, securing 196 seats in total.

Now, the key question is what about the Senate? As for now, there is a tie and each party has 48 seats. Control of the U.S. Senate will not be decided until January 5th, when the runoff races in Georgia will take place for both of the state’s seats. Republicans are also expected to win North Carolina and Alaska, but it won’t be enough. If they lose both seats in Georgia, there will be a tie – and then the Vice-President has the final say. For the markets, it would be better if Republicans retained a majority in the Senate, thereby checking Biden’s proposals. In such a scenario, the Republican Senate could prevent any major tax increases or regulatory tightening. Good for Wall Street, but not necessarily for gold.

Implications for Gold

However, gold gained after the elections, as the chart below shows.

Actually, the price of gold did not merely increase – as one can see, it jumped above the crucial level of $1,900, even touching $1,960 on Friday. This is in line with our Thursday’s analysis suggesting that gold could be the biggest winner of these election in the long-term. By that I mean when the dust settles, the price of gold could continue its rally. After all, the financial markets were on the sidelines before the elections, waiting for the results. And remember, Biden will move to the White House in rather bad times, unless somebody likes epidemics. But this is good for gold. You see, the number of Covid-19 cases is steadily increasing, meaning that a larger fiscal stimulus would be needed in the future. Gold could therefore shine under Biden – at least until the macroeconomic outlook radically improves, which is not likely to happen in the near future.

Having said that, the price of gold plunged on Monday on news of successful Covid-19 vaccine testing. This news is bad for gold in the short-term, but it’s not yet clear that it will damage the long-term fundamentals of gold. Although the vaccine will help to fight the pandemic, the macroeconomic outlook remains fragile, which should support the gold prices. Moreover, there is still a long way to go before any widespread vaccination – and before the real interest rates will rise above zero.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports, and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. To enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet, and you are not on our gold mailing list yet, we urge you to sign up there as well for daily yellow metal updates. Sign up now!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Gold & Silver Trading Alerts.

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The elections are behind us. However, the official results are still not definite. What does it mean for gold prices?

Ladies and Gentlemen, the new President of the United States is… still unknown! The election results are not available, as some states are still counting the votes. The race is very balanced, with few states remaining too close to call. At the moment of writing this report, Joe Biden leads the White House race with 253 electoral votes, while Donald Trump has 213 electoral votes. So, Biden is more likely to become the new POTUS. However, with those few states officially still undecided, Trump could still win. Hopefully, we will get some of the results later today, but it might even take several days to count the ballots in some locations.

One thing is sure: Trump over-performed polls and expectations in the presidential election, again. What a shame, pollsters! We warned our Readers several times against trusting polls:

“although mainstream pollsters have corrected some of the mistakes they made in 2016, it’s safe to assume that Trump has better chances of reelection than it is widely believed and reflected in the mainstream polls”.

Moreover, Republicans also performed much better than expected in elections to Congress. We don’t know all the results yet, but as for the moment, both Democrats and Republicans have 48 seats in the Senate. So, yes, Republicans could still lose the Senate, but that is less likely now than before the elections. They are also on track to pick up a few seats in the House of Representatives. So, while all the focus is on presidential election results, investors shouldn’t underestimate the surprising strength of the Republicans in Congress.

Implications for Gold

What does it all imply for the gold market? Well, it’s not easy to determine since we still don’t know the results. However, the most likely scenario is Biden to enter the White House, Democrats ruling in the House, and Republicans maintaining a majority in the Senate, which is actually relatively bad news for gold.

I mean, the Blue Wave was considered to be the best scenario for the yellow metal. If controlling both the White House and Congress, Democrats could do whatever they want. So, they could boost government spending and public debt and raise taxes, supporting the gold prices. However, if Republicans keep control over the Senate, they will block the worst ideas of Democrats. Thus, the divided power would be better for the economy but worse for the shiny metal.

However, the probable lack of a blue wave shouldn’t plunge the price of gold. Yes, there will still be gridlock and higher uncertainty, and gold prices may be under brief pressure in the short-term, but the fiscal stimulus will eventually arrive. Therefore, no matter who ultimately wins, gold’s long-term fundamental outlook remains bullish. The coronavirus pandemic will continue to affect the US economy negatively, so both the White House and the Fed will provide more stimulus. The monetary policy will stay ultra-dovish, and the real interest rates will remain in the negative territory.

Moreover, when the dust settles after the elections, and the uncertainty will become lower, gold may continue its rally. As the chart below shows, the gold price has already increased (after an initial drop). So, maybe the actual winner of the elections is gold?

Of course, it’s too early to assess with certainty the medium-term impact of elections on the gold market. The volatility could stay with us for quite some time, and the dashed prospects of significant fiscal stimulus could negatively affect the gold market in the short-term.

However, one thing remains interesting. In contrast to the 2016 presidential election, the gold market swings were much smaller this time. It seems to be bullish news, but, hey, don’t count your chickens before they hatch. So, stay tuned. Hopefully, we will know the more complete election results soon and the new FOMC statement, which will enable us to describe the gold’s outlook with more certainty!

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports, and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. To enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet, and you are not on our gold mailing list yet, we urge you to sign up there as well for daily yellow metal updates. Sign up now!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Gold & Silver Trading Alerts.

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Election Day has finally arrived. Who will win, and why gold will remain the biggest winner of them all?

So, today is the day! It's Election Day. For quite some time, national polls indicate that Biden has a significant advantage. He is also polling scarcely close ahead of Donald Trump in key battleground states, but, in some states, the lead has recently narrowed. So, in many places, the race is still too close to call, making them toss-up states. Hence, although according to political pundits, polls, and bets Biden will become the next POTUS, anything could happen.

And we mean - anything. Everyone knows that back in 2016, Hillary Clinton also led in the polls. However, Trump won the election, to everyone’s surprise. Of course, the polling methodology has been improved since. But now, Biden has a much wider advantage than Hillary did in 2016, and he is much more conservative and more moderate in his approach than Clinton (historically, more moderate presidential candidates generally do better in presidential elections).

Additionally, the election results might not be known right away, and there are indications that they might be contested. Who knows what could happen if that’s the case? According to some analysts, contested elections should increase the geopolitical uncertainty and boost the safe-haven demand for gold. On the other hand, some analysts also believe that the contested elections would put downward pressure on the stock market, dragging gold down in the process. The fact of the matter is that contested elections would undoubtedly delay the fiscal stimulus package, which should be negative for gold prices.

So, who is right? It is true that recently, gold has been moving in tandem with the stock prices, responding to the stimulus expectations. But, in times of stress and reduced faith in the American institutional system, gold could decouple from equities and behave more like a safe haven asset.

In any case, tomorrow, the elections will already be behind us. Hopefully, we will get the results quickly. No matter who wins, the new administration and the new Congress will have to deal with the second wave of the coronavirus and fragile economic recovery.

Oh, by the way, as the chart below shows, the US reported 101,273 new Covid-19 cases on Saturday, the daily record not only for America, but for any country! And according to some epidemiologists, the worst is yet to come –that is, if the upward trend in cases continues, which could overwhelm the health system.

No matter whether red or blue, the new government is likely to pump more liquidity into the economy. So, gold could thrive under either Trump or Biden, although we could see increased volatility in the short-term precious metals market.

Implications for Gold

What does all the above mean for the gold market? Well, investors should look past the elections already. They matter less than many people believe. The 2016 presidential election is the best example of that. The price of gold indeed declined in the aftermath of Trump’s victory, but the downward trend was eventually reversed.

So, yes, you should be prepared for elevated volatility this week. After all, we are about to witness not only the elections, but also the FOMC meeting and equally important economic reports, including the nonfarm payrolls.

However, as I have repeated many times before, gold’s responses to geopolitical events are relatively short-lived. In the long run, what drives gold prices are the fundamental factors. And the fundamental outlook remains positive for the yellow metal. Both the monetary policy and the fiscal policy are extremely dovish. The public debt is ballooning, while the US dollar is weakening. The real yields remain negative.

Yes, as the chart below shows, the real interest rates have stabilized or even increased slightly since August, which explains gold’s struggle in recent months.

Nevertheless, the Fed will maintain its policy of ultra-low nominal interest rates for years, while inflation will accelerate at some point, possibly when the economic recovery sets in for sure. This means that the real interest rates should remain very low or even decrease further, supporting the gold prices in the process.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports, and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. To enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet, and you are not on our gold mailing list yet, we urge you to sign up there as well for daily yellow metal updates. Sign up now!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

-----

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Gold & Silver Trading Alerts.

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Covid-19 infections are surging. Will the price of gold surge too?

Things are not looking good folks. The epidemiological situation is worsening. As the chart below shows, the number of new daily cases (the rolling 7-day average) has recently reached a new record.

The record spread has brought the national total to about 8.78 million infections and nearly 227,000 deaths. What’s more frightening, with the recent spike, these numbers are only going to rise higher. Some epidemiologists even claim that the next several weeks will be the darkest period of this pandemic. As a reminder, the second wave of the Spanish Flu was the worst and most lethal – let’s hope that history will not repeat itself when it comes to the coronavirus infections.

However, what is really disturbing is that in certain states, the rising cases of Covid-19 are threatening the healthcare’s capacity that needs to deal with the pandemic. Therefore, we ask you to please stay careful and take care of yourself as your number one priority!

Moreover, the latest news about the delays in the vaccine tests suggest that a viable vaccine that has proved efficient and safe to a reasonable extent will not be produced on a full scale by spring 2021 at the earliest. Like the many times that I’ve warned you before - waiting for the vaccine is like waiting for Godot, who never arrives.

Unfortunately, counting on the vaccine has become the primary national strategy for dealing with the coronavirus. Thus, the risk remains that without a quick vaccine distribution, the epidemic will spiral out of control.

Implications for Gold

So, how will the Covid-19 cases surge affect the gold market? It seems that this time, people were expecting the second wave of the pandemic and are slightly less frightened. But, if the hospitalization rate increases further, the panic may set in again. The second wave implies more social distancing and a slower recovery. It is also an argument for somewhat larger than smaller financial stimulus.

All these reasons are fundamentally positive for the yellow metal, although the gold price has been trading around $1,900 so far, as one can see in the chart below.

The US presidential election is another issue by itself. Rightly or not, some voters can blame the President for the rising number of infections. Thus, the pandemic increases Biden’s changes, whose potential victory is perceived as a more bullish scenario for gold (especially if Democrats also take full control of the Congress). As the chart below shows, he has an average polling lead of 8.0 percentage points over Trump. I would not bet my money on these polls (simply because they are inaccurate and respondents don’t want to give their genuine opinion about politics when polled), but nevertheless, the lead is pretty impressive.

Still, expect the unexpected. Although Biden is believed to be more inflationary and positive for the gold prices, as a response to the election results, the markets can behave unexpectedly, especially in the short-term. As a reminder, many analysts believed that Trump would be very bullish for the gold prices. Of course, gold gained significantly during his presidency, and, yes, it soared during election night, but it quickly reversed and went into a downward trend for months.

In any case, the elections may be of less importance than many people believe. After all, no matter who is elected, the next president will deliver a large financial stimulus, because the pressure from businesses, Wall Street, states, and people is simply too big. The increases in fiscal deficits, public debt, and the Fed’s balance sheet should support the gold prices.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports, and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. To enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet, and you are not on our gold mailing list yet, we urge you to sign up there as well for daily yellow metal updates. Sign up now!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

-----

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Gold & Silver Trading Alerts.

• Read more