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Will Gold Survive Another Moderna-Like Shot?

By Investing.com (Barani Krishnan/Investing.com)CommoditiesNov 17, 2020 04:09AM ET
www.investing.com/analysis/will-gold-survive-another-modernalike-shot-200544849
Will Gold Survive Another Moderna-Like Shot?
By Investing.com (Barani Krishnan/Investing.com)   |  Nov 17, 2020 04:09AM ET
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Once bitten, twice shy is the saying. In gold’s case, it appears that once pricked, it’s twice as strong.

A week ago, gold was on the mat, knocked out by Pfizer’s COVID-19 vaccine news that sapped almost 5% or $100 from the yellow metal—the most in a single day since August.

Fast forward one week later:

Gold took another sucker punch, this time from Moderna’s update on its coronavirus vaccine. But far from the knockout blow, this one landed gold on the ropes. After a moment, it was back on its feet, stung but not out.

Gold Daily
Gold Daily

Question: Has gold gotten past the scare of the COVID-19 jabs—which are as much a safeguard against the virus as they are an antithesis to a rally in the yellow metal?

Jeffrey Halley, Sydney-based analyst for New York brokerage OANDA, certainly thinks so, saying in a note issued early Tuesday: 

“After the trauma of the post-Pfizer price action, gold has now held its ascending trendline support three times over the past week. It suggests the momentum has now swung to the topside, especially with more easing from the Federal Reserve almost certain.”

The spot price of gold, which tracks bullion, took a hit of almost $26, or 1.64%, after the Moderna vaccine update. But it ended the day just about $2, or 0.1%, lower.

It remained in the red in Tuesday’s Asian session, but less than $1, or 0.02%, lower at $1,888.26.

Gold On A 'Lucky Break'?

Halley noted that bullion did not slip beneath the $1864.50 support on Monday. For good measure, he remarked that Monday's finish of $1888.80 for the spot price was “as lucky a number in Asia as you are ever likely to see.” 

“All the more impressive was that gold rallied even as the US yield curve steepened,” he added, referring to the U.S. 10-year note.

For context, Moderna said its experimental vaccine was 94.5% effective in preventing COVID-19, versus Pfizer’s 90% efficacy. The Moderna product also needs just regular refrigeration versus the -90 Farenheit needed for Pfizer's vaccine.

With gold taking the latest vaccine development in stride, Halley has a topside target of $1905-$1907 for bulion, matching the 50 and 100-Day Moving Averages, respectively. 

If it breaches that range, his next aim is $1935.

Halley added:

“The ascending trendline support is at $1866.50 an ounce today, followed by the $1850.00 an ounce zone. A loss of $1850.00 an ounce would target a more significant retreat to the 200-DMA at $1789.00 an ounce.”

Still, he is loath to say gold is a one-way bet,  “unless it survives something like a Trump-tweet surprise that torpedoes equity markets violently”.

He adds:

“One caveat to the bullish outlook is that gold has yet to de-correlate itself from aggressive equity market selloffs.” 

Bullion’s 50-Day EMA Continues To Be 'Interesting'

Gold chartist Christopher Lewis said Monday’s action showed significant support for bullion and the 50-day Exponential Moving Average was “going to continue to be interesting”.

He added in a blog posted on FX Empire:

“The fact that the indicator is sitting at the $1900 level suggests that the market is trying to see whether or not it can break above there. Ultimately though, we had that nasty red candlestick from last week that could continue to show signs of negativity, and typically do not have those types of candlesticks without some kind of continuation.”

“Furthermore, the $1800 level underneath would be the best place to be a buyer from what I see, due to the fact that it was the scene of a major breakout and of course the 200-day EMA is sitting there. All things being equal, this is an opportunity to pick up gold at a massive support level, but I also recognize that the market is going to be highly sensitive to the U.S. Dollar index as well, as we have had a massive negative correlation.”

Ultimately, it may be a matter of time before gold goes higher, said Lewis, though more choppy and difficult trading conditions might come first.

He adds:

“Therefore you probably need to look to the daily supportive candlestick before putting some type of money to work. Right now, we do not quite have that, but it is starting to stabilize a bit which is a good sign.”

Near Term Target Above $1,900 

Sunil Kumar Dixit of SK Dixit Charting in Kolkata, India, says gold has been holding support at $1,890 and so long as this prevails, the $1901 target was a possibility.

He adds:

“Above this lies the resistance of $1,915, the 20 Week Simple Moving Average of $1,927 and critical resistance at $1,934.”

But Dixit also says that weakness below $1,890 can push gold toward a downside test of $1,860 and $1836.

“Extended sell off can mark the much anticipated bottom of $1,768 which coincides with the 50-week Exponential Moving Average."

Goldman Says On Course With Its $2,300 Target

Goldman Sachs, meanwhile, is sticking to its 2021 bullion target of $2,300.

In a report published Friday, the investment bank said its outlook for gold was premised on the global economy returning to balance between positive news of potential vaccines for the COVID-19 and the still prevalent risks of further economic damage from more waves of the virus.

On my end, I find bullion still a “Sell” in the near-term, using Investing.com’s Daily Technical Indicator. Based on this projection, I envisage a three-tier support, which begins at $1,869.07 and progresses downward to $1,849.60, before final buying support that emerges at $1,834.46.

Should spot gold buck that call and turn upward, then it will likely find a three-tier near-term resistance instead that begins at $1903.68 and progresses to $1,918.82, before selling pressure that emerges after $1,938.28.

As with all projections, I urge you to follow the calls but temper them with fundamentals—and moderation—whenever possible.

Good luck

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. He does not own or hold a position in the commodities or securities he writes about.

Will Gold Survive Another Moderna-Like Shot?
 

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Will Gold Survive Another Moderna-Like Shot?

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Comments (6)
Ross Dre
Ross Dre Nov 17, 2020 11:12AM ET
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It absolutely should because the fed keeps making paper money worthless.
Phil Kimmel
Phil Kimmel Nov 17, 2020 11:05AM ET
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Gold has been one of the worst investments in the past 40 years! Forty years sgo it was $800 an ounce. Even money in a savings account would have done better. Deal with reality please.
Kevin Wear
Kevin Wear Nov 17, 2020 11:05AM ET
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How wrong is this statement!? If you were to buy Brookshire Hathaway shares and gold in 2000, you’ve been much better off holding physical goals. After all, neither pays dividends.January 1980. Gold hits record high at $850 per ounce becaus of high inflation because of strong oil prices,In 1977 gold was $150 and in1983 = $300Buy often to ruduce risk of buying at the top and in a panic, like describe above.
Khaled Najjar
Khaled Najjar Nov 17, 2020 11:04AM ET
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Sure because USD index going down
Kristof Naessens
Kristof Naessens Nov 17, 2020 7:18AM ET
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Gold was on the rise before ever talk of a virus. A vaccine will not cure the debt and all the money printing in the world.
Barani Krishnan
Barani Krishnan Nov 17, 2020 7:18AM ET
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True. These cyclical moves in stocks get reversed within 24 hours, if you notice what's happened in the past two occasions with the Pfizer and Moderna developments. The gold crowd seems to have "awakened" to this :)
Ali Rate
Ali Rate Nov 17, 2020 5:41AM ET
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God bless you bro nice
Barani Krishnan
Barani Krishnan Nov 17, 2020 5:41AM ET
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Thanks much, Ali. Hope your positions are working well. Bests.
Abdelraziq Abuaisha
Abdelraziq Abuaisha Nov 17, 2020 4:21AM ET
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It already survived it dear writer, gold is showing resistance and stability, dollar is weakening day after day. Go back to my last comment on you articles, you’ll find that I have told you: “trying to put gold down is nothing but burning the dollar, and keep pumping the market will get you nowhere but to see the dollar going south”. This is exactly what happened last week dear writer. Still the same will happen, you’ll enjoy every single part of your collapse; that I have told you it’s happening at the end of 2019. :)
Barani Krishnan
Barani Krishnan Nov 17, 2020 4:21AM ET
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Abdelraziq, gold is probably more challenged than ever now because of the macro and dollar influences that do not give a nano seconds' break to the yellow metal on most days. It does appear that the safe haven crowd has awakened over the past two weeks to forge its own path for gold. Time will tell if that holds. I certainly hope it does. The Jan 5 Senate run-offs in Georgia will be key for gold as those races will determine if the Democrats get to control all three houses and pass the stimulus needed to get the US economy back on its feet.
 
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