Gold futures score fractional gains even with vaccine expectations

Gold futures scored fractional gains in active trading today, with the February 2021 Comex contract trading to a low of $1831.50 before recovering. As of 3:40 PM EST gold futures are currently fixed at $1839.40 after factoring in a net gain of $1.10 (+0.06%).

Today the U.S. Food & Drug Administration released a statement written by Commissioner Stephen M. Hahn, M.D. which said that the FDA held an advisory committee meeting to discuss the authorization of a Covid-19 vaccine candidate as part of the agency’s review of safety and effectiveness data.

“For nearly 11 months, we have all been learning to live and function in a state of uncertainty, adjusting to a “new normal” as the COVID-19 pandemic has drastically affected the way most of us live, and has also tragically claimed the lives of hundreds of thousands of Americans.”

He went on to address the urgent need for medical countermeasures to diagnose, treat and prevent the coronavirus. To that end the focus of this meeting was “an important step in the process” to grant emergency use authorization for a vaccine for COVID-19 prevention, submitted by Pfizer Inc. in partnership with BioNTech Manufacturing GmbH.

A statement by Pfizer’s Chief Executive Albert Bourla said, “Filing in the U.S. represents a critical milestone in our journey to deliver a Covid-19 vaccine to the world and we now have a more complete picture of both the efficacy and safety profile of our vaccine, giving us confidence in its potential”.

Now it is up to the FDA panel which will vote as to whether or not they recommend the approval of Pfizer and BioNTech’s vaccine for emergency use on Thursday. This means that emergency use of the vaccine could begin as early as Friday.

While it is truly a medical miracle that vaccines with incredibly high efficacy rates have been developed in such a short period of time, the financial damage and economic fallout that will follow cannot be ignored. Besides the extremely accommodative monetary policy by the Federal Reserve, the U.S. Treasury has already spent approximately $3 trillion funding the first fiscal stimulus bill (cares act) passed and implemented earlier this year.

While the Congress, Senate and current administration have been unable to agree upon a new coronavirus relief package, the need for additional fiscal stimulus grows day by day. Approximately 12 million unemployed Americans who have been relying on the extended benefits will end later this month, and the 40 million Americans who have been aided by the eviction moratorium will also expire this month on December 31^st.

Which is why many analysts including myself believe that it is not if more fiscal stimulus will be forthcoming, but rather when and how much. Additional fiscal stimulus will add to the economic fallout that will follow after the pandemic has ended. As such the budget deficit for fiscal 2021 could be much greater than the record budget deficit set this year. These necessary actions and expenditures by the government will most certainly devalue the dollar and conversely be highly bullish for gold prices next year.

Wishing you as always, good trading and good health,