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Gold Under $1800, Overrun By Risk-on Train

·3-min read

By Barani Krishnan - Wall Street's runaway risk train showed no signs of slowing Tuesday, overrunning gold for a third straight day and sending it to sub-$1,800 levels as investors continued to bail out of havens on optimism over Covid-19 vaccine trials and cabinet nominees named by President-Elect Joe Biden.

Gold for December delivery settled down $33.20, or 1.8% at $1,804.60 on New York’s Comex. It earlier fell to $1,797.65, a low not seen since July 3 intraday bottom of $1,783.65.

With the combination of Wednesday’s rout, the benchmark U.S. gold futures contract has lost about $70, or 3.7%, in three sessions beginning Friday.

The spot price of gold, which reflects real-time trades in bullion, was down $33.88, or also about 1.8% lower, at $1,803.67 by 3:00 PM ET (20:00 GMT). Spot gold barely survived a foray into $1,700 territory, stopping at a four-month low of $1,800.42.

Gold’s collapse came as Wall Street’s Dow hit historic highs above 30,000 points in a rally that pulled the three major U.S. stock indexes up by about 1.5% each.

Adding to pressure on the yellow metal on Tuesday was options expiry for the December futures contract, traders said.

“It seems nothing can stop gold’s slide,” said Ed Moya, analyst at New York’s OANDA. “U.S. stocks must be taking their Xanax as coronavirus anxiety levels continue ease on vaccine optimism and the beginning of the Biden transition.”

Risk-on has hit fever-pitch on Wall Street since the progress reported on Monday by AstraZeneca (NASDAQ:AZN) in its Covid-19 vaccine.

According to the British-Swedish drug company, the product was 70% effective in protecting against the coronavirus and could reach 90% efficacy on a second dose. The shots could also be stored in an ordinary refrigerator and likely to be much cheaper than rival solutions from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA), which announced 95% efficacy rates over the past two Mondays for their vaccines but more challenging store conditions.

Gold, which hit $2,000 record highs on safe-haven buying back in August when there was little solutions to the Covid-19 outbreak, sunk 5% on the Nov. 9 announcement by Pfizer, and 3% over two days after the Moderna update.

Adding to this week's fervor in stocks was the go-ahead given by the White House late on Monday for the transition of President-Elect Joe Biden, so that he and his chosen team can escalate the fight against the COVID-19. Of his various cabinet picks, the one particularly lauded by Wall Street was former Federal Reserve Chair Janet Yellen as Treasury Secretary.

And while gold prices could go even lower, some analysts saw a rebound by as early as Wednesday.

“The lowest it will go, I think, will be $1,785,” said Phillip Streible, chief market strategist at Blue Line Futures. “I expect people to be clamoring to get back in at that point. Those who’ve been rotating out of gold and into bitcoin and what-not will be foolish not to buy gold at those levels.”

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