Gold Prices Decline as Coronavirus Vaccination Begins

December 15, 2020 12:50:22

The price of gold dropped from its two-week high as coronavirus vaccines were prepared for introduction to various markets. Gold futures in the United States decreased to $1,853.20 per ounce, a 1.1% decline while Spot gold decreased by the same percentage to $1,848.30 per ounce.

The vaccine rollout seems to be affecting the price of gold, as the Johnson & Johnson coronavirus vaccine is currently awaiting regulatory approval and Pfizer progresses with its vaccine trials. This progress for both firms comes after Britain became the first country in the West to begin an extensive vaccination drive.

While the National Health Service in the UK warned that individuals who have a notable allergy history shouldn’t get immunized, regulators in the U.S. gave indications that they’d give emergency use authorization to the coronavirus vaccine from Pfizer, arguing that they had no safety concerns regarding the vaccine and called it highly effective.

These positive developments in health led investors to invest in riskier assets, as new highs were recorded in global equities. Daniel Briesemann, an analyst with Commerzbank, stated in an interview that gold prices seemed to be affected by the news of the discovery of a coronavirus vaccine and the higher risk appetite shown by investors.

In the recent weeks, investors also withdrew from ETFs that were gold backed, with a shift in risk sentiment being observed. The World Gold Council recently released new data that shows that despite inflows in gold ETFs being recorded for the past year, November was the first month that experienced outflows.

Additionally, large stimulus packages are being implemented in a bid to reinforce various economies, and projections show that bullion may rake in the largest annual gains seen in 10 years. The European Central Bank is expected to expand its purchase plans as other central banks begin to buy more bonds.

Another reason why investors may be moving away from gold is the recovery of digital currencies, which can be acquired as financial assets. Quantitative strategists from JPMorgan Chase Bank state that the trend of money being removed from gold into Bitcoin funds, which has been happening since October, will carry on in the long run, as more cryptocurrency positions are taken up by institutional investors.

JPMorgan’s calculations show that gold prices will be affected by a structural flow headwind in the near future if this continues.

Aside from gold, other mineral resources are also bringing decent returns to the sector players. For instance, Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) has enjoyed the position of being a leader in the production of vanadium and uranium, and now the firm is venturing into the extraction of rare earth elements.

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