What could a Yellen/Powell team mean for future stimulus?

It is no secret that one of the primary reasons that gold has been under so much selling pressure recently was the announcements made by three pharmaceutical companies that they had developed a vaccine for the Coronavirus. Two of which have proven to have an incredible 90-95% effectiveness. As genuine as this optimism is, the caveat is that a vaccine available to the public will not be available until sometime next year, most likely April or beyond.

The first doses of vaccine produced will be rightfully issued to first responders and medical workers. That could come as early as this year. However, to produce these vaccines in the quantities needed to have enough doses to make them available to the general public will certainly take some time.

Time is the most important aspect because the need for fiscal stimulus continues to grow as the 10 million unemployed Americans that have lost their livelihood due to the pandemic continue to live in uncertainty without the ability to pay their bills including rent/mortgage, food, and other necessities.

Currently, there is a moratorium that forbids evictions or foreclosures that will end on December 31. This brings us to a quandary as to how these millions of people in America and many more abroad will survive the timeline between global accessibility to a vaccine and economies rebuilding globally.

With the new administration headed by President-elect Joe Biden beginning on December 20, there is a real concern that there will be no stimulus bill passed or available to the public till he takes office. However, there is certainly a real hope that a robust stimulus package could be put together. Janet Yellin has been selected to be our next head of the United States treasury, and Jerome Powell is expected to remain chairman of the Federal Reserve.

Both Yellin and Powell have worked together for years for the Federal Reserve and have an excellent working relationship and report. Many analysts including myself believe that the team of Janet Yellin and Jerome Powell will be extremely accommodative and timely agree upon a stimulus package that will contain trillions of dollars for Covid-19 aid. This means that not only will there be money from the U.S. Treasury, but it will also involve direct input from the Federal Reserve.

Two question remains, first will this stimulus come quick enough to save the enormous number of large businesses that are either in the process of or have already filed for Chapter 11 bankruptcy? Secondly, will the stimulus allocate the funds needed by the 10 million Americans currently unemployed with the knowledge that their benefits will run out later on in December?

Until some sort of stimulus package is enacted we can expect to see gold prices continue under pressure. Currently, the most active February 2020, Comex contract of gold is fixed at $1779.90 which is a net decline of $8.20, and spot gold is currently fixed at $1776.10

If a major stimulus package is enacted it's intrinsically believed that that will take the dollar lower and be highly supportive of gold prices. However, the market is running on optimism based upon the belief that a vaccine will be forthcoming, but the question remains will businesses under pressure and individuals who are unemployed be able to last until the vaccine is available to the general public and the economy begins to rebound?

Wishing you as always, good trading and good health,