Gold Rises as “Vaccine Hope” Fades

London Bridge - The Gold Analyst

The prices of gold rose on Wednesday on strong demand for safe-haven assets. The demand for safe-havens was lifted by weak economic data from major economies and the lack of sufficient data on a potential COVID-19 vaccine.

Spot gold was trading at $1,749.17 an ounce as of 0939 GMT.

Homebuilding data in the U.S. for April reveals a 30.2% decline in housing starts to a seasonally adjusted annual rate of 891,000 units. This is the lowest level since 2015 and the biggest percentage decline since 1959. House construction permits also dropped by 20.8% to a rate of 1.074 million units. April appears to be the worst month in the coronavirus crisis. The U.S. reported record declines in manufacturing production and retail sales and an all-time high unemployment rate. In Japan, business confidence plunged to its lowest level in ten years as companies prepare for the possibility of a long period of economic weakness.

In another negative development, the medical news website STAT reported that Moderna Inc. has provided insufficient data to support the effectiveness of its experimental COVID-19 vaccine. Some of the issues raised by STAT include the lack of data about the ages of trial participants, lack of data on participants’ response to the medicine and lack of comment from the National Institute for Allergy and Infectious Diseases, Moderna’s partner in vaccine development. It was also not clear how long the immunity produced by the vaccine will last. This development affected U.S. equities and the Asian stock markets which had a short rally earlier this week.

According to Anand Rathi Shares and Stock Brokers’ commodities analyst Jigar Trivedi, the fading of the “vaccine hope” means that the yellow metal is back in focus, especially with poor economic data releases. He also noted the possibility of a renewed trade dispute between the two largest economies in the world.

Meanwhile, the markets are waiting for the release of the minutes of the April 28-29 policy meeting of the Federal Open Market Committee. Federal Reserve Chairman Jerome Powell has previously stated in his testimony before the U.S. Senate Banking Committee that they are considering to extend access to the credit facilities to more borrowers.

 

Source: Gold gains as bleak economic outlook underpins safe-haven demand