Having fallen on Monday, the price of gold rose by 1.25% on Tuesday, as traders reacted to a weakening dollar and expectations of a compromise-ready Fed meeting on Wednesday.
With Fed stimulus coming at some point (hopefully soon), and talk of negative rates being floated around again following the latest London lockdown announcement, there is some hope that gold – and precious metals as a whole – will go on another bull run, or at least bounce back somewhat from the climbdown it has seen over recent months.
As said by IG Chief Market Analyst, Chris Beauchamp: “The rally in gold from its five-month low appeared to have stalled last week, but it appears a fresh move higher is underway, fuelled by expectations of more central bank action to help prop up economies around the globe.”
What has stood in gold’s way, though, is the news of vaccine breakthroughs and roll-outs, with the first Pfizer-BioNTech dose being delivered on Monday seeing the precious metal push downwards. As the vaccine roll-out continues over the middle-term, a potential risk-on climate could see a greater shift back towards equities.
However, in the short-term, precious metals may rally as European countries re-enter their respective iterations of lockdown, and the initial giddiness of vaccine roll-outs wears off.
As stated by OCBC Bank in Singapore economist, Howie Lee: “But gold could rally in 2021 when the vaccine optimism dies down and investors’ focus returns to rising inflation expectations due to the large swathe of monetary and fiscal stimulus the US economy still requires.”
Also worth noting is that despite a recovery from gold on Tuesday, it was far out-performed by silver, which posted a 2.74% rally. On Tuesday evening, gold sits at 1,850.48 USD per ounce, level with where it was at the start of June – during its long rally. Meanwhile, silver sits at 24.50 USD per ounce, where it sat at the end of July, and not far off where it spent most of September to November.