Gold drops after Moderna vaccine announcement
Gold prices plummeted on Monday, after Moderna’s preliminary phase three trial showed its coronavirus vaccine is more than 94% effective in preventing infection. Financial markets embraced the good news and began fully pricing in a return to pre-pandemic life before the next winter, prompting the abandonment for safe-havens, such as the dollar. Gold dropped over USD30 but quickly recovered most of its losses after the dollar weakened.
On paper, it looks like Moderna won the vaccine race. Its Covid-19 vaccine boasts a slightly more effective rate than Pfizer and is much easier to store. However, this would be Moderna’s first approved drug for vaccination and will likely mean they will have more hurdles for ramping up production. Operation Warp Speed will provide all the resources to both Pfizer and Moderna and possibly others.
The vaccine news was very bearish for the US dollar as it changes the macroeconomic backdrop for the rest of the world. The dollar will surely become a funding currency at some point in 2021 and that should pave the way for significant weakness. Gold may not get massive stimulus from Congress or steady safe-haven flows from Covid-19 concerns, but Fed policy that will ultimately drive dollar weakness should allow the precious metal to make another run towards the USD2,000 line, which is a psychologically significant level.
Bitcoin shrugged off Moderna’s vaccine news and is resuming its bullish trend. Bitcoin seems to have everything going right for it: Mainstream acceptance is improving, and President-elect Biden appointed Gary Gensler, someone viewed as friendly towards cryptocurrencies, to lead his financial policy transition, and steady institutional interest. Bitcoin seems like it might have enough momentum before the end of the year to make that run towards the USD20,000 level.
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