Gold Rally Sputters With Bets on Vaccine, Economies Denting ETFs

The rally in gold, which surged to an all-time high two weeks ago, is showing signs of losing steam with hopes for a coronavirus treatment and signs of improving economies undercutting the metal’s appeal as a haven.

Bullion posted back-to-back weekly losses for the first time since June, and on Monday headed for its third decline in four sessions. Gains in holdings of gold exchange-traded funds, a key driver of the metal’s surge this year, have also slowed. Inflows into SPDR Gold Shares, the top ETF backed by the metal, have been flat for four straight sessions, the longest run in two months.

Gold has slipped about 7% from a record on Aug. 7, buffeted by improvements in some U.S. and Chinese economic indicators and speculation that efforts to expedite virus treatments could soon yield results. Investors are awaiting Federal Reserve Chair Jerome Powell’s speech Thursday at the Jackson Hole Economic Policy Symposium. Last week, Fed policy makers panned the yield-curve control idea that had helped bolster bullion.

ETF investors slow bullion buying spree, with flows into SPDR Gold flattening
Gold is continuing to consolidate following its rapid rise until the start of August,” Commerzbank AG analyst Carsten Fritsch said in a note Monday. “‘This can also be seen in the wait-and-see attitude of ETF investors. The gold price is likely to find it hard to make further gains without any impetus in the form of ETF demand.”

Bullion has risen about 27% this year, making it one of the best-performing commodities, on massive liquidity injections from central banks and governments trying to help economies to recover from the virus pandemic. But risk-on sentiment in broader markets is now eroding those gains, with equities surging to new highs and Treasury yields starting to recover this month.

The U.S. Food and Drug Administration confirmed Sunday that it had cleared a coronavirus treatment that involves blood plasma donated by people who’ve recovered from Covid-19. Separately, the Financial Times reported that Trump is considering whether to bypass normal U.S. regulatory standards to fast-track an experimental vaccine from the U.K. for use in the U.S. before November’s election. Meanwhile, Moderna Inc. said it plans to provide 80 million doses of its experimental coronavirus shot to the EU.

The news on possible treatments “should be bullish for the dollar and bearish for gold,” Edward Meir, an analyst at ED&F Man Capital Markets in New York, said by phone Monday.

Meir expects the metal will trade will trade from $1,870 an ounce and to $2,000 for the time being, with markets weighing Jackson Hole, coronavirus cases and the dollar.

“This is just sort of a brief setback, but we need to consolidate for a while” he said. “You do need to get some consolidation as investors evaluate what’s next.”

Spot gold fell 0.6% to $1,929.06 at 1:51 p.m. in New York. Futures for December delivery fell 0.4% to settle at $1,939.20. In other precious metals, silver also declined.

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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