Gold is losing its shine, after vaccines have dulled the glow

The threat of multiple vaccines set to enter the world to inoculate us all from covid-19 is giving investors a reason to look for alternative riskier assets. Gold this year has seen a flock of investors trying to find growth in a low yield world, but now that there is hope for the globe to return to the pre-pandemic lifestyle, the attractiveness of gold has already begun to deteriorate.

Some of the moves that can be seen in futures market incorporate keeping the exposure to precious metals but moving them into more industrialized variants. Prices in Platinum, Silver, and Lithium have been seeing a steady influx of price recovery and in some instance’s growth.

The risk perception is changing with the advent of COVID-19 vaccines, quite simply the vaccines give the mentality that there is less risk overall, changing how we think about carrying risks in markets. It is generally accepted that the impacts on the economy that can be bearish (or Bullish depending on cycle) will have an inverse relationship with gold. So, in the development of a vaccine, we see the likely hood the economy will be able to revert to its former self increases. Cyclicals, Bonds, and value become the traders’ new best friend.

What I expect to see over the medium turn is a push and pull relationship between those concerned about the near term pre vaccine COVID-19 issues and then those looking well and truly beyond. Unfortunately, I cannot make it as simple as looking at the vaccine results, real interest rates are in the control room sitting right beside of inflation.

In the current environment its unlikely to see inflation shoot to the moon, but we must be aware that the Federal Reserve is most certainly interested in letting inflation run hot given the chance.

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