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After weeks of gloom and despair, the news of a possible vaccine has helped the US stock market to get back on a path of recovery. This forward march of the stock market has finally stalled the upward trajectory of the price of gold that had been seeing unprecedented growth in the face of global uncertainties and improbabilities. Last week, gold prices had risen to its highest point since 2012 but it finally saw a decline at closing on Monday, thus negating some of the gains made over the last few weeks.
Renewed hopes drive positive growth for stock market
Biotechnology company Moderna Inc has announced positive results with regards to the phase 1 clinical trial for an experimental vaccine for the Covid19 coronavirus. This has improved the outlook of investors towards the stock market. The risk appetite became keener and the haven demand for gold has fallen leading to its price seeing a gradual decline.
Brien Lundin, editor of Gold Newsletter has explained why the boom in the price of gold wasn’t something that was sustainable over the long term. He has suggested that even though the price of gold saw steady and high growth over the first half of April, it had mostly started to trade sideways over the last few days in a pattern that was constantly tightening. A breakout was inevitable and it was only a matter of time before prices started falling again and that is exactly what has happened.
Why gold prices have fallen?
Other precious metals like palladium and platinum, however, are still on an upward trajectory for the time being with a growth of 9.1% and 6.4% respectively. The price of gold has been subjected to a lot of fluctuations over the last few months and has ranged from a minimum value of $1,676 an ounce to a maximum value of $1,788 an ounce.
This is mostly a result of global fears of economic uncertainties due to the current global pandemic that has rendered many businesses inactive. Central banks from around the world have been trying to negate the impact of this inactivity and uncertainty.
Things have, however, started to take an upbeat turn as many such businesses are already on the path of undoing the ill-effects of the current global situation. This has alleviated some of the risks that were being associated with the global stock market and with economies showing signs of recovery, investors have become a bit less reluctant. This has slowed down the sale of gold and that is what has ultimately led to its price finally coming down on Monday.
Stimulus to continue
Federal Reserve Chairman Jerome Powell has further reaffirmed that the central bank is still very much capable enough to continue delivering the necessary stimulus to drive the market in a positive manner. These measures of stimuli will keep lessening the negative impact of the pandemic which further drives the risk down and the price of secure bullion like gold will slowly start to return to normalcy if things keep progressing in a similar vein.