Fundamental Comment

Gold rises as doubts over Corona vaccine trigger haven demand

Gold rises as doubts over Corona vaccine trigger haven demand

Gold prices rose during Wednesday trading, as demand for safe havens increased, amid doubts about the effectiveness of the Corona vaccine, as well as gloomy data from major economies.

As of 12:25 GMT, spot gold hovered around $1,750 an ounce, where the precious metal touched its highest level during the session at $1,753.36.

The precious metal benefited from a shift in investor sentiment from hazardous assets to safe havens on the back of doubts about the effectiveness of a new vaccine recently announced.

Vaccine experts have questioned the effectiveness of Moderna's announcement on Monday that its potential Vaccine Covid-19 has generated an immune response in all 45 phase I participants, arguing that there is not enough evidence to support the claims.

As for economic data, UK and euro area inflation figures released today showed a sharp fall in the year ended April, as the coronavirus measures hit economic activity.  

On the other hand, the possibility of seeing more monetary measures by the Federal Reserve pushed the dollar lower and boosted demand on the precious metal as an alternative investment.

During his testimony before the U.S. Senate Banking Committee, Federal Reserve Chairman Jerome Powell said the Fed is looking to expand access to credit facilities for additional borrowers, including slower-sized States.

Powell reiterated his remarks since the end of April, saying: "This is the time to use the great financial power of the United States. We're all in front of us, the amount that has been disbursed so far, in the context of the American economy, is fairly modest."

He also stressed that the Fed was "committed to using our full range of tools to support the economy at this difficult time even as we recognize that these actions are only part of a broader public sector response."

Markets are closely awaiting the minutes of the FOMC's monetary policy meeting on April 28-29, later in the day.

The US central bank has kept interest rates close to zero and injected significant stimulus to support the economy affected by the Corona pandemic.

Meanwhile, the dollar index, which measures the performance of six major currencies against the US dollar, dropped for a third straight session to 99.29.

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