Gold prices extend weekly losses on stimulus concerns and positive vaccine news

Gold prices extend weekly losses on stimulus concerns and positive vaccine news by  Michael Harris  for Invezz

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Gold prices are heading for a second consecutive weekly decline on the back of encouraging news about coronavirus vaccine developments and news of the U.S. Treasury’s decision to allow emergency loan programs to expire.

Fundamental analysis: Risk improves to push gold prices lower

U.S. Treasury Secretary Steven Mnuchin sent a letter to U.S. Federal Reserve Chair Jerome Powell, saying the $455 billion allocated to the Treasury as a part of the CARES Act should instead become available for Congress to reallocate.

“If the Fed does start shrinking its assistance programme that could be a bit of headwind for gold again… The monetary debasement argument that has supported gold could weaken,” said Lachlan Shaw,  helm of commodity research at the National Australia Bank.

Gold is 23% in the green year-to-date, thanks to its appeal as a hedge against inflation, Covid-19 outbreak, and currency devaluation and as a result of an unprecedented stimulus brought by central banks to ease the pressure from the coronavirus pandemic.

“It’s going to be a huge bumpy ride (for gold) waiting for stimulus to come in,” said Stephen Innes, head strategist at financial services company Axi.

“It is now looking at $1,900 into year-end,” he added.

In the meantime, data from coronavirus developments by AstraZeneca and Oxford University showed that there was a robust immune response among people of older age, easing some coronavirus-induced concerns.

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