Gold consolidated in early trading on Tuesday after reaching its highest levels since October 2012 on Monday. The yellow metal was pressured and stocks jumped amid rising risk appetite, spurred by news of a potential COVID-19 vaccine.
Cambridge, Massachusetts based biotech company Moderna announced on Monday that its experimental vaccine appears to be safe and able to stimulate an immune response against COVID-19. Dr. Tal Zaks, Moderna’s chief medical officer, told CNN that if future studies go well, the company’s vaccine could be available to the public as early as January. Investors cheered the news and hopes emerged over an improved outlook for the global economy.
Data from Johns Hopkins University indicates that coronavirus COVID-19 global cases have risen to 4,817,105 with 318,775 fatalities. In the hard hit United States, over 90,000 people have died from coronavirus and 1.5 million cases have been reported.
Gold has been in an uptrend since March 20th, boosted by US/China trade tensions and unprecedented levels of global stimulus to offset the fallout from the coronavirus pandemic. Gold typically benefits from central bank stimulus due to its appeal as a hedge against inflation. Meanwhile, the US dollar is normally pressured by stimulus and over the long term has a negative correlation with gold.
The Federal Reserve has cut interest rates to zero and chairman Jerome Powell has suggested that more monetary stimulus could be on the way. During CBS’s “60 Minutes” on Sunday, he stated; “There’s a lot more we can do” and added “We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot.”
Looking at the gold daily chart we can see that a bearish shooting star pattern has formed. However, bulls are unlikely to be put off with historic highs so near in view. Trendline support lies to the downside and the prior highs of $1,795 represent potential resistance overhead.
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