A vaccine can’t come soon enough; we have a long way to go to eradicate the virus

Yesterday’s announcement that two companies have developed a vaccine that has now completed the stage III trials, and is 90% effective in killing the coronavirus. This was truly welcome news and responsible for the large gains in US equities and concurrently the steep selloff in both gold and silver.

However, that yesterday’s excitement has subsided reality has begun to set in. The reality is that new cases of the coronavirus are at record numbers and do not seem to be slowing down. Rather it seems there is a second and in some places third wave continue to wreak havoc on families and the economy. The truth is that for the first time since the pandemic began traders are seeing light at the end of the tunnel. But the real question is how long will it take till we are at the tunnels end.

Pfizer pharmaceutical has pledged to produce roughly 50 million doses by the end of the year. However, this vaccine requires an initial dose followed by a booster. That means that they are really saying they will be able to produce enough vaccine for 25 million individuals in 2020.

The first individuals to receive the vaccine will obviously be first responders; police, firefighters, emergency medical technicians, doctors and hospital staff. According to the Department of Homeland Security there are over 1 million firefighters in the United states. They estimate that local police departments have over 500,000 employees which includes 436,000 law enforcement personnel. Sheriff’s account for approximately 291,000, and there over 155,000 emergency medical technicians.

Add to that the millions of individuals that are doctors, nurses and medical technicians currently staffing hospitals, and it becomes clear that the initial 25 million doses (primary vaccine followed by booster) will be quickly administered to first responders. The remaining doses will then be allocated to high risk individuals.

Simply put the initial production will reach very few, if any individuals that do not fall in to the categories listed above. Concurrently new cases have reached epidemic proportions with over hundred thousand new cases emerging each and every day in the United States. With approximately 10 weeks remaining in 2020, there is a real probability that an additional 700,000 individuals in the U.S. will contract the virus before the end of the year. The take away is that the production of sufficient quantities of the vaccine could be made available for widespread immunization will probably take 8 to 10 months to achieve.

While yesterday’s announcement is truly a breakthrough the jubilation expressed through the financial markets taking equities sharply higher, and putting tremendous selling pressure on gold and silver will be short-lived. It is for that reason that yesterday’s $100 decline in gold quickly reversed in trading today with gold futures currently trading $21 higher and fixed at $1875.50. Most importantly the timeline for widespread immunization will necessitate further fiscal stimulus from the United States as well as other countries. Recent price advances in both gold and silver have been based upon the belief that more fiscal stimulus will be forthcoming, and sadly yesterday’s announcement will not diminish the need for governments to continue to create fiscal stimulus aid packages for the millions of individuals that are or will be infected by the coronavirus. In fact, even if the vaccine was globally available today for widespread immunization, the world has not even begun to feel the economic fallout that will follow long after the pandemic has been eradicated.

Wishing you as always, good trading and good health,