Gold fell nearly 2% to its lowest level in four months on Monday. It is because U.S. business activity data is better than expected. Optimism over the progress of the COVID-19 vaccine is driving expectations for a faster economic recovery and encouraging investors towards risky assets.
According to data on global markets, spot gold slumped as much as 1.7% to $1,838.61 an ounce. The figure came after it had earlier fallen to its lowest level since July 21 at $1,834.95. U.S. gold futures also reportedly slumped 2% to $1,835.50.
The stocks surged after data on United States business activity was released. It turns out that the value surprised many people. In November it was revealed that its position increased at the fastest rate in more than five years.
Gold is Below The Key Levels
It is known that gold broke below the key level of $1,850 after the release of an unusually strong US PMI. The release only reduces the need for stimulus. No one expects a strong reading; both in services and manufacturing. That was conveyed by Edward Moya.
This important finding comes after AstraZeneca from the UK said that its vaccine could be effective at around 90% without serious side effects. The news follows some previous news about vaccines from Pfizer and Moderna which claimed to have high effectiveness above 90%.
The USD is also known to rise against its rivals. Elsewhere, benchmark 10-year Treasury yields also surged. Gold that was below $1,850 triggered a wave of sales stoppages. That statement made by a Blue Line Futures chief market strategist in Chicago.
This metal is considered to be a hedge against inflation and the decline in the value of other currencies on the global market. That commodity has risen more than 21% this year. The main supporting factor is the economic damage caused by the pandemic.
AUD/USD Still Struggling to Stabilize
The AUD/USD currency pair is still struggling to extend its recent forecast of 0.7264 while continuing to spin towards 0.7285 at the start of Tuesday's Asian session. The Aussie pair jumped to their highest level since September 2 earlier on Monday.
Meanwhile, expectations of a Coronavirus vaccine hint at the possibility of an early increase. The strength of the USD and the challenge to risk appear to have weighed on the pair afterward. However, the situation will still continue to be monitored by market participants.
Although vaccines/treatments for covid have recently delivered optimistic final-stage trial results and are ready for government authorization, the trading sentiment has so many hurdles. There are a lot of factors there. It is especially before regaining their pre-pandemic status.
Among them, the worsening state of the virus and the uncertainty surrounding U.S. stimulus are the main catalysts. In America, the number of inpatients has continued to soar since November 10, although new infections have slowed lately. Such conditions occur in the UK and Europe.
Development of Vaccines and Viral Infections
Countries such as France and the UK have hinted at plans to loosen restrictions on activity during year-end celebrations. On the other hand, AstraZeneca vaccines with smaller doses reportedly have an effectiveness rate of 90%. It is ready to join the Pfizer and Moderna leagues.
All three are competing to overcome the corona pandemic. However, it still takes up to several months for further clinical trials to be declared safe and mass-produced. Market participants must be careful and remain patient as long as the vaccine is still being researched.
Meanwhile, the U.S. is now forming a Western alliance to combat the recently formed trade group China. The move could increase the tensions between China and America. Australia's economy could also be affected as Beijing recently declared it was punishing Canberra.
