Gold gained 1% on November 10 after a sharp decline in the last session. The rebounded happened after focus returned to the possibility of more monetary stimulus to revive the global economy that is still suffering from the coronavirus pandemic.
Spot gold gained 1.1% to trade at $1,881.39 per ounce by 0605 GMT. On the other hand, U.S. gold futures were up 1.3% at $1,878.70. Prices plummeted by 5.2% on November 9 after U.S. drug-maker Pfizer Inc said its experimental Covid-19 vaccine was over 90% effective depending on their initial trial results.
Central banks are not likely to alter their accommodative stand in the near to medium-term since it will take some time for the vaccine to be deployed and for a pick-up in inflation, growth, and labor market to happen. The head of commodity research at National Australia Bank, Lachlan Shaw, said:
“If inflation expectations pick up as a result of increased economic activity from the vaccine, that should keep a lid on long U.S. real yields and be a supporting driver for gold.”
Gold appears to benefit from widespread stimulus since it is considered to be a hedge against inflation and currency debasement. Although vaccine optimism boosted some risk appetite, uncertainties continued to dominate the market over the effect of surging coronavirus cases in the US and Europe. The chief global market strategist at financial services firm Axi, Stephen Innes, said:
“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.”
Robert Kaplan, the Dallas Federal Reserve Bank President, said that the second wave of COVID-19 poses risks to the economy. Loretta Mester, Cleveland Fed President, said that the Fed’s emergency lending programs are still necessary.
Silver surged 0.2% to trade at $24.12 an ounce while palladium was 0.3% higher at $2,484.67 and Platinum gained 0.2% to trade at $868.45.