By Adam Claringbull
Investing.com – Gold was up on Tuesday morning in Asia after falling more than 5% in Monday’s session. The announcement of a successful late-stage COVID-19 vaccine trial sent gold’s prices plummeting as investors rushed into shares.
Gold futures were up 1.47% at $1881.60 by 12:10 AM ET (4:10 AM GMT).
Pfizer (NYSE:PFE) announced on Monday that its COVID-19 vaccine, co-developed with BioNTech (F:22UAy), had a 90% efficacy, the news sparked optimism that an economic recovery was finally on its way. Investors rapidly quit the safe-haven metal for stocks, sending gold prices down hard.
“(The news) really exceeded everyone’s best-case scenarios. There was growing nervousness that we might not get a strong vaccine result, so this unleashed the risk-on trade and for gold, signalled a massive exodus of safe-haven plays,” Edward Moya, senior market analyst at OANDA said to Reuters.
However, by the opening of Asia’s markets, some resiliency had returned after the sell-off hit bottom, with prices pulling back some of the losses. There are also questions about the new vaccine’s longevity, supply, and safety that are yet to be addressed, removing some of the gloss from stocks and other higher risk investments.
“The economy is still in need of much support and only 50 million (vaccine) doses will be available, so we’re not in the clear with the virus and the calls for stimulus will be growing.” Moya added.
Alongside Pfizer’s positive vaccine news came the less promising information that Brazil has halted its trial of China’s Sinovac Biotech Ltd (NASDAQ:SVA) vaccine after a serious adverse event. Details of the incident are yet to be made available.
Positive impetus for gold is coming from U.S. stimulus hopes, with investors optimistic that substantial measures will be in the pipeline after Democrat Joe Biden’s successful challenge for the presidency.
Dallas Federal Reserve Bank President Robert Kaplan said on Monday that although the U.S. economy is rebounding from a deep contraction, the resurgence of COVID-19 cases poses downside risks. Kaplan's colleague, Cleveland Federal Reserve Bank President Loretta Mester, added that the emergency lending programs set up by the Fed during the pandemic are still needed.
"I still think we've got more stimulus coming and the Fed will keep rates low, while a vaccine is going to provide that reflationary impulse ... That's why the markets are still holding onto gold," Stephen Innes, chief global market strategist at financial services firm Axi told Reuters.