Gold holds some questions
Gold has been tricky since the vaccine news from Pfizer and BioNtech was announced. Gold futures fell the most in one day for over 7 years. Now Moderna's vaccine news sends a clear signal: The virus will most likely be under control next year.
Where does that leave gold? A buy, sell, or hold?
Here are some of the factors to balance:
1. Consumer demand may pick up. China is the biggest buyer of gold. Often those purchases come for the Lunar New Year and prices pick up from end of December through January. See the stats on that for the last 20 years below:
2. Global risks still remain - Brexit, US administration gridlock, the wider impact of COVID-19 on the economy remains
3. Loose monetary policy are set to remain. The Federal Reserve is set to keep rates at their present low levels through to 2023.
4. Some etf buyers have thrown in the towel on gold. SPDR Gold shares, the largest ETF, lost 26 tons last week. This was the biggest outflow since 2016.
5. 10 year Treasuries are heading higher and this reduces gold's appeal.
One area that stands out to me is a potential buy in gold around December 23 through to the New Year. The Golden Week holiday from October 1 -7 in China saw 637 million people travel across the country without any rise in cases. This is good precedent for a 'normal' New Year celebration in China and at least a short term pick up in gold regardless of the longer term picture. Any reader have any further insight to shed on gold's outlook to help steer us through?