Once again, the Gold price is under pressure as biotech firm Moderna (Nasdaq: MRNA), reports that their Coronavirus COVID-19 vaccine is 94.5% effective. Last week, the gold price slid by 116 USD per ounce on the news of Pfizer’s breakthrough COVID-19 vaccine. As the charts show today, there is a high risk that gold prices (XAUUSD) will crash down, reaching $1727 on a break to the September low of $1847.
Moderna vaccine breakthrough
Moderna, much like Pfizer, is in the midst of a phase 3 trial, and today, they reported that for a sample of 95 participants, their COVID vaccine was 94.5% effective. The outcome beats Pfizer’s results of 90%. However, the innovation is that Moderna’s vaccine will last up to thirty days in common household fridges, and up to twelve hours at room temperature, beating Pfizer's vaccine which needs to be stored at -70 degrees Celsius, a temperature that most household freezers can’t reach.
Moderna anticipates to have 20 million doses of their new vaccine ready to ship to the United States by the end of the year and looks to produce another 500 million to 1bn doses in 2021.
What does the Moderna vaccine mean for gold prices?
The gold price has been gaining sharply since mid-2018. At the start, it was on trade wars, and traders position themselves for an economic slowdown. However, in 2020 the rise in gold prices was due to the COVID-19 crisis management of governments and central banks worldwide.
They have injected and printed large amounts of fresh money to support their economies, and this has caused gold prices to trade higher. Traders have also lifted gold prices on the haven appeal. However, as we saw last week, on the news of the Pfizer vaccine, gold prices sank, and stock indices rose. The rationale behind this is that investors see less need for aggressive fiscal and monetary stimulus, pulling out the support of gold prices.
Instead, investors are piling into the beaten shares of companies that looked like they would bankrupt on further lockdowns. Bankruptcy risks are still high, but with two vaccines getting ready to be shipped, and more vaccines on track, it is likely that by the end of next year life will be back to normal, and it is this that stock and gold traders are pricing-in.
Gold price technical outlook
The position of gold prices is particularly vulnerable following last week’s slide. XAUUSD, bounced from the $1847.39 level on September 24 and 28, and November 9, forming a solid and well-defined support level.
If we link XAUUSD’s September 16 high of $1973.35, and last week’s high of $1965.49 with a trend line, we can form a descending triangle pattern, with the help of the $1847.39 support level.
Using this pattern, we can derive a take profit level of $1727.80, on a break to the September low of $1847.39. If the pattern indeed plays out XAUUSD will remain bearish as long as the price trades below this week’s high of $1899.76. If a breakout happens tomorrow, it might improve the risk-reward ratio of this bearish view.
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5. Hit buy or sell, and then confirm the trade
Gold price, XAUUSD, six-hour chart
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