On Monday (November 9), from 19:00, spot gold started a seemingly endless downward spiral.
Spot gold first plunged $50 in half an hour, after a calm period of time to continue to turn down, and then broke below the $ 1860 barrier, more than 100 dollars back from the daily high, the day once plunged 5%. Spot silver plunged 6%, below the $24 mark; COMEX silver futures also plunged, down 6.16% on the day. Shanghai gold fell 3.8%, Shanghai silver fell 5%.
Gold’s continued decline is mainly due to the following 4 major reasons.
Risk appetite shifted, gold became a sacrifice
As you can see from the major asset movements, there has been a shift in market risk appetite. Money poured into risky assets and gold was abandoned.
After the U.S. market opened on Monday, the yield on ten-year U.S. bonds rose to 0.958%, the highest since March, and the yield on thirty-year U.S. bonds rose to 1.765%, the highest since March. The expected recovery from vaccines has spawned inflation, first reflected in bond yields, which rose to reduce the attractiveness of gold and depress gold prices in the short term.
The transfer of funds to U.S. stocks and U.S. bonds formed support for the dollar index, which at first fluctuated little, but began to move up sharply at 22:30, further suppressing the price of gold. The dollar rose 2% against the yen during the day and is now at 105.41.
Monday night the two oil gains are expanding, WTI crude oil futures surged 11%, standing at $ 41 / barrel; Brent crude oil futures also rose more than 10%, at $ 43.4 / barrel. After the internal futures opened, the main crude oil rose 7% in a row.
Monday night’s speeches by OPEC+ energy ministers also fueled optimism in crude oil bulls. OPEC + “big brother” Saudi Arabia oil chief said, if necessary, OPEC + can adjust the production cut agreement, OPEC + may be extended to 2022 throughout the year.
European and American stock markets also continued to pull up. Germany’s DAX rose more than 6%, France’s CAC 40 rose more than 7%, Spain’s IBEX 35 rose more than 9.4%, and Italy’s FTSE MIB rose more than 6.1%. S&P 500 E-Mini futures touched a new all-time high, and Dow futures rose more than 5%. FTSE Russell 2000 futures triggered a meltdown upwards. HSI futures extended gains to 2.15% in overnight trading.
U.S. stocks opened at record highs on all three major indices. The Dow opened with a surge of more than 1,500 points to a new all-time high; then the S&P 500 touched a new all-time high, and the Russell 2000 index surged 4.5% to a new all-time high. Offline and travel concepts rose sharply, with airline stocks surging, with Boeing up 12%, Southwest Airlines up 19% and American Airlines up 22%.
Goldman Sachs strategists Dominic Wilson and Vickie Chang wrote in a report released Sunday (Nov. 8) that “possible vaccine news or the next key risk point in the coming weeks.” They noted that initial news on vaccines could cause the market to rise sharply from current levels.
Stuart Oakley, head of forex trading at Nomura Securities (Nomura), also previously noted, “If a vaccine is developed, we will see a release of all pent-up demand.”
In addition, judging by the volatility of the Nasdaq Spot Index, JPMorgan says many of the call option spread buyers from early October have yet to return. Once this group is attracted, the gamma effect they can generate will be a huge boost to U.S. stocks.
A vaccine is said to stop 90% of new crown infections
The most immediate trigger for the shift in risk appetite was tonight’s news on vaccines. In late-morning market news, the news is great – a new coronary vaccine developed by Pfizer and BioNTech has prevented 90% of new coronary infections in a large study. This is the most encouraging scientific advance in the battle against coronavirus to date.
The Russian Ministry of Health then announced that the Russian Sputnik-V vaccine was over 90% effective.
Eight months after the worst outbreak in a century, Pfizer’s preliminary results paved the way for the pharmaceutical company to apply to regulators for an emergency license to use it. This finding is based on an interim analysis of 94 new coronavirus infections (the trial had 43,538 volunteers, 42% of whom were from different regions, and 94 infections have now occurred).
If the data holds, it could mean that the world has a crucial new tool to control an epidemic that has killed more than 1.2 million people worldwide. William Gruber, Pfizer’s senior vice president of clinical development for vaccines, said this could be the best news for the world, the U.S. and public health.
Ugur Sahin, BioNTech’s chief executive officer, said the effectiveness of the first vaccines had previously been expected to be between 60 and 70 percent, and that exceeding 90 percent was an amazing improvement.Sahin said in an interview that it showed the outbreak was manageable, which is a victory for science. There is confidence that the immune response to the new crown vaccine will be sustained for at least a year, although this is uncertain at this point.
He acknowledged, however, that there are limitations to the data. Details of the vaccine’s efficacy are unclear at this point, and it’s unclear how well the vaccine will work in key populations such as the elderly. It’s also unclear whether the vaccine will prevent serious illness, as there were no serious infections in this round of trials. Pfizer’s CEO said Monday night that he expects the New Crown vaccine study should be completed by the end of the month.
Moderna Inc. is also developing a vaccine using a similar technology, and if that study is also successful, two vaccines could be available in the U.S. around the end of the year. Pfizer expects to get two months of safety-tracking data in the third week of November, a key metric required by U.S. regulators before emergency authorization approval. If no problems are found with that data, Pfizer will apply for authorization in the U.S. this month.
The companies say they should be able to produce 1.3 billion doses of the vaccine by the end of 2021, enough to vaccinate 650 million people, but expect to be able to deliver only 50 million doses by 2020. The vaccine relies on messenger RNA technology, which has never before been used in an approved drug, and unlike the AstraZeneca-Oxford vaccine, the Pfizer-BioNTech vaccine relies on mRNA technology, which effectively encodes immunity to viruses directly into human genes, turning human cells into vaccine factories and allowing them to be developed much faster than traditional vaccines.
The Golden Ten VIP risk warning report pointed out last Friday that stepping into the last two months of 2020, the US vaccine-related news is expected to follow, which will bring asymmetric risks to assets such as gold and US stocks. All investors need to pay attention to the following timetable.
Hard Brexit risk reduction
Last Friday, British Prime Minister Johnson said that a Brexit deal will be reached and that the UK is well prepared on the issue of Brexit. According to a statement issued by the British Prime Minister’s Office and published by the President of the European Commission von der Leyen on social media, the two sides said in the call that despite some recent progress in the negotiations, there are still significant differences in some areas, involving fair competition and fisheries issues, among others.
At 00:53 GMT on Tuesday morning, UK Chancellor of the Exchequer Sunac further confirmed that we have made significant progress in the Brexit negotiations and an agreement can be reached.
According to Xinhua, Johnson discussed the latest progress in the trade talks with von der Leyen on the 7th and decided to continue the negotiations in London this week. With the mid-November date approaching, this round of UK-EU negotiations is believed to be extremely crucial.
To sum up, multiple factors including vaccine progress, money flowing back into U.S. stocks, U.S. debt and reduced risk of Brexit have exacerbated the downturn in gold prices.
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