GOLD PRICES fell sharply on Monday as encouraging coronavirus vaccine results lifted world share markets and prompted investors to reassess demand for safe-haven assets.
Reuters reported spot gold down approximately 4.5% at US$1,863.51 per ounce during the session, as investors moved towards assets more closely linked to an economic recovery.
The sell-off followed an announcement from Pfizer and BioNTech that an initial analysis of their Phase 3 trial indicated their vaccine candidate was more than 90% effective in preventing COVID-19 among participants without evidence of previous infection.
The interim findings were based on 94 confirmed cases among trial participants. The companies said the study would continue, with further safety and efficacy data still to be collected.
The announcement marked an important development, although the vaccine remained subject to regulatory review and was not yet available for widespread use.
Financial markets responded quickly. World equity indexes reached record levels during Monday’s trading, while oil prices rose sharply as investors anticipated stronger demand if an effective vaccine allowed economic activity to recover.
Reuters reported US crude oil up approximately 9.6% at US$40.72 per barrel during the session, with Brent crude gaining approximately 8.5% to US$42.79.
The shift in sentiment comes as central banks continue to provide substantial economic support.
In Australia, the Reserve Bank last week reduced its cash rate target to 0.10% and announced plans to purchase A$100 billion of government bonds over approximately six months.
The purchases will focus on Australian Government and state and territory bonds with maturities of around five to ten years. The RBA also lowered its three-year government bond yield target and the interest rate on new drawings under its Term Funding Facility to 0.10%.
The Bank said Australia’s recovery was underway but expected it to take time. It indicated that it did not expect to increase the cash rate for at least three years, with a rise dependent on actual inflation being sustainably within its 2–3% target range.
Monday’s gold sell-off demonstrates how quickly changes in the pandemic outlook can alter market sentiment. The vaccine findings have strengthened recovery hopes, while the RBA’s latest measures underline the continuing need for economic support.
Disclaimer
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