Silver prices steadier on vaccine news this time around
|- Coronavirus developments are driving the market in precious metals.
- The positive news is being met with less volatility, but markets could be too complacent.
The prices on precious metals were far more resilient this time around to the latest development in the race to vaccinate the global population against the coronavirus.
Both gold and silver dropped significantly on the news that Moderna's (MRNA) COVID-19 vaccine trial candidate was found to be 94.5% effective in preventing the coronavirus, taking silver down by some 2.5% on the knee jerk.
By comparison, last week's news that Pfizer (PFE) vaccine candidate was demonstrably 90% effective sent the precious metals tumbling 5% in gold and almost 9% in silver.
The market has already priced in the inevitability of a vaccine so that initial relief rally in markets is mostly done.
However, what is more, encouraging this time around is the fact that Moderna's candidate is stable after 30 days of refrigeration vs Pfizer's vaccine that requires very cold temperatures and lasts only until a few days before use.
While there are risks of near-term pullbacks in risk appetite as the world battles the pandemic, such improvements in the details are likely to create greater confidence amongst investors about the medium-term outlook for global growth.
However, that is not to say that the bull market in precious metals is invalidated.
It is still very early days and many questions that will determine whether these first vaccines and others like it, can prevent the most severe cases or quell the coronavirus pandemic are left unanswered.
Market is too complacent
The third wave of the virus spreading faster and wider in the US and Europe and analysts at TD Securities say that they think the market is too complacent.
''We think it is prudent to begin introducing some structures that imply some USD firmness,'' the analysts argued.
''The recovery in real rates and USD continue to cap any material upside in gold, and a reactive rather than proactive Fed is keeping the door open for the pain trade to grow in the near-term, as we approach the December meeting,'' and, ''the Fed may step in to keep policy supportive for the foreseeable future.''
''As a result, we expect the Fed to change the composition of Treasury purchases in favour of longer-dated bonds. All of this suggests real rates should continue on their downward trajectory and ultimately continue to fuel a bull market in gold into 2021.''
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