Daily Brief, Nov 18 – Everything You Need to Know About Gold on Wednesday!
Arslan Butt • 3 min read
Good morning fellas,
Prices for the precious metal, GOLD, closed at 1,880.17, after placing a high of 1,893.46, and a low of 1,876.85. After placing gains for three consecutive days, the GOLD prices fell, posting losses on Tuesday. The GOLD price fell due to the optimism surrounding the latest vaccine development by Moderna. After Pfizer and BioNtech, Moderna became the second company to announce an even better efficacy rate of 94.5% for its vaccine. However, we still have a long way to go before the vaccine can be delivered to everyone. According to Federal Reserve Vice Chairman Richard Clarida, the chances of economic recovery in the US have increased, thanks to the successful testing of candidates by Moderna and Pfizer Inc.
The market optimism supported the risk sentiment, eventually weighing on the safe-haven GOLD prices on Tuesday. Meanwhile, the strength of the US dollar also played an important role in dragging the GOLD prices to the downside. With the increased hopes for economic recovery after the announcement of effective vaccine candidates, the need to deliver a stimulus package to support the economy decreased, lending strength to the US dollar, and ultimately weighing on the GOLD prices.
Furthermore, the expectations of a large US coronavirus stimulus package are on hold, due to President Donald Trump’s administration, in a highly unusual move, refusing to allow President-elect Biden to access briefings and government facilities. This has increased the chances that the stimulus package will not be delivered any time soon; as a result, the US dollar gained traction and weighed on the GOLD prices on Tuesday. However, on the European side, the number of coronavirus cases continues to rise, showing no sign of slowing down, forcing governments to impose more public health restrictions across the region, ultimately delaying any promise of economic recovery and keeping the safe-haven demand intact. This capped further losses in the GOLD prices on Tuesday.
The United States of America also saw a rapid rise in the number of coronavirus infections. Many states, including California, have started to put various restrictive measures in place, in an effort to control the spread of the virus. These measures also kept the local currency under pressure and limited losses in the GOLD prices.
Moreover, as the number of coronavirus cases is increasing to alarming levels across the country, Federal Reserve Chairman Jerome Powell said on Tuesday that the need for additional coronavirus relief from Congress was now a bigger than ever. Powell also said that the recent announcements by Pfizer and Moderna were certainly good news in the medium term; however, major challenges and uncertainties remain in the near term.
Powell stated the need for direct financial support from Congress, which should target specific groups that need income assistance during the crisis, unlike the lending tools offered by the Fed. He also said that many Americans would need direct support rather than a lending facility from the Fed, as they would have trouble repaying loans.
On the data front, at 18:30 GMT, the Core Retail Sales for October were released, showing a decline to 0.2%, against the projected 0.6%, which weighed on the US dollar. The Retail Sales from the US for October also fell, hitting 0.3%, compared to the projected 0.5%, also putting pressure on the US dollar. The Import Prices in the US for October dropped to -0.1%, from the expected 0.2%, weighing on the US dollar and capping any further losses in the GOLD prices.
At 19:00 GMT, the Capacity Utilization Rate figures from the US were reeased, indicating an increase to 72.8%, against the anticipated 72.3%, supporting the US dollar and adding further to the losses in the GOLD prices on Tuesday. However, Industrial Production remained flat, in line with the expectations of 1.1% for October. At 20:00 GMT, the Business Inventories for September came in at 0.7%, which as up against the anticipated 0.5%, which put pressure on the US dollar. The NAHB Housing Market Index from the US rose to 90, from the projected 85, supporting the US dollar and eventually weighing on the GOLD prices.