Gold prices drop amid COVID-19 vaccine optimism

Gold prices drifted lower in Wednesday’s trading session.

The plunge in the precious metal price is coming on growing optimism over U.S. talks for the latest stimulus deal and a COVID-19 vaccine hitting the market very soon saw a retreat from the safe-haven yellow metal.

• At the time of writing this report, Gold futures prices dropped 0.32% at $1,813/ounce, though it’s now trading above the $1,800 mark after it recorded impressive gains on Tuesday as the U.S dollar retreated, yet gold bulls still face uphill challenges from the COVID-19 vaccine optimism prevailing among global investors.

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Global investors are primarily reducing their bullish bias, taking into consideration the most recent testimony from U.S Treasury Secretary, Steve Mnuchin, and US Federal Reserve Chairman, Jerome Powell, on Monday to the Senate Banking Committee.

Though both hinted that the world’s largest economy was on the path to recovery, they emphasized the need for a lifeline.

READ: U.S dollar set for weekly losses, currency traders buy Euro, British Pound

What you should know

In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on why the yellow metal could face more selling pressure in the coming weeks, taking into consideration, market sentiments that the future looks bright:

“Gold had been trading well below USD1,800/oz and came close to testing the psychological make or break for ETF concerns USD1,750/oz level. Flashing green lights at the end of the tunnel suggest investors should look through the immediate concerns and focus on the future, which seems incredibly bright and bullish.

“So, with month-end selling pressure mostly out of the way, it could allow investors to focus on those flashing green sectoral lights at the end of the Covid-19 tunnel.”

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What to expect

Although, a weaker U.S dollar effectively threw a lifeline around gold prices yesterday, helping it rally back from two weeks of declines. That said, Gold prices might resume its bearish play amid high hopes on COVID-19 vaccines.