- Gold prices sank as much as 5.2% on Monday as Pfizer’s vaccine update hinted the coronavirus pandemic may be contained earlier than anticipated.
- The pharmaceutical giant said Monday it’s experimental coronavirus vaccine was more than 90% effective at preventing COVID-19 in trial patients.
- The news drove stock indexes to record highs as investors increased bets on a near-term economic rebound.
- Safe havens including gold and Treasurys plunged as investors shifted cash out of the popular hedge assets.
- Watch gold trade live here.
Spot gold fell as much as 5.2% on Monday, its biggest plunge since August, as Pfizer’s positive vaccine update reignited investor risk-taking.
The pharmaceutical giant announced Monday morning that its experimental coronavirus vaccine was more than 90% effective at preventing COVID-19 in trial participants. The news pushed major stock indexes to record highs and fueled a similarly strong shift away from safe havens.
With a viable vaccine reviving hopes for a complete economic recovery and containment of the virus, investors focused their bets on value stocks and cyclical industries. Bullion tumbled below its key $1,900-per-ounce support level to an intraday low of $1,850.51 per ounce. Treasurys, another popular safe-haven asset, also fell.
Read more: Morgan Stanley’s top cross-asset strategist pinpoints 3 areas of the market set to directly benefit from a successful COVID-19 vaccine — and explains why investors may be ‘surprised’ by the level of normality we return to
Gold prices typically rise in times of uncertainty or when investors seek to hedge against an economic downturn. The precious metal was recently bolstered by the Federal Reserve signaling it will hold rates near zero through 2024. Historically low rates diminish the opportunity cost of holding gold.
“Perhaps we’re now seeing a bit of a reset moment for gold, where it’s correlation with risk assets starts to fade and it returns to its traditional roots as a safe haven instrument,” Craig Erlam, senior market analyst at Oanda Europe, said in a note, adding such a shift may be “a little premature.”
Read more: Morgan Stanley says to load up on these 10 stocks featured on the firm’s ‘buy list,’ which has dominated the broader market this year
Pfizer now plans to apply for an emergency-use authorization from the US Food and Drug Administration. If approved, the authorization will allow the firm to more rapidly distribute its vaccine. The news suggests a viable drug could reach the US population relatively soon and end the virus’s economic destruction.
A sooner-than-expected vaccine rollout would also dampen the need for more fiscal stimulus. Hopes for fresh government spending helped lift gold above $1,950 last week. Increased spending lowers the value of the US dollar and tends to boost gold prices.
Gold traded at $1,866.90 per ounce, up 29% year-to-date.
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