Vaccine optimism fuels U.S. equity rally and moves gold and silver lower

Today a third pharmaceutical producer announced they have produced a viable vaccine candidate which can be stored at normal refrigeration temperatures. AstraZeneca’s vaccine can now be added to the list which includes Pfizer pharmaceutical and Moderna.

All three vaccine candidates have completed their stage III trials. The fact that three separate companies have developed viable and extremely effective vaccines only shortens the timeline for all individuals to be vaccinated if they wish.

While the fact of yet another pharmaceutical firm producing a viable vaccine, the extreme significance is that they all have such a high rate of effectiveness. While a flu shot typically has an efficacy rate of approximately 40 to 50%, all three vaccine candidates have shown potential for a 90% effectiveness rate.

This is a true game-changer. Years ago, when polio and smallpox were a scourge that took many lives, in both cases the vaccines developed had an effectiveness rate above 95%. This resulted in the eradication of the virus from the face of the earth. This is truly a viable reason for there to be such optimism even though the timeline when it will become available to the general public is still in the distant future.

This suggests that there is a probability that a global economic recovery could take less time than was previously assumed. U.S. equities moved higher on that potential. The Dow Jones industrial average gained 327 points or 1.12%. The S&P 500 gained just over ½ a percent, while the NASDAQ composite gained the least of the major indices posting profits of 0.22%.

This also put tremendous pressure on the precious metals complex with sharp drops in both gold and silver pricing. As of 4:50 PM Eastern standard time gold futures basis the most active December contract lost just over 2%, and the $38 drop today took the December contract to $1834.30. Silver sustained a much greater percentage decline, giving up 3.03%, or $0.75 per ounce, and is currently fixed at $23.62.

Our technical studies indicate that the potential support at approximately $1850, was clearly taken out today as gold prices moved and closed well below that price point. The next key level of support occurs at the 200-day moving average which is currently fixed at $1798. Below that the next level of support should gold continue to track lower comes in at $1769. This corresponds to a 50% retracement of the rally which began in March when gold bottom to $1450 up until August 10^th the apex, and highest price gold has ever traded to; $2088 per ounce.

Wishing you as always, good trading and good health,