If Russia Has Indeed Developed A Coronavirus Vaccine, It's Bad News For Gold

A COVID-19 cure would be bullish for equities and minimize the need for safe haven assets.
Author:
Publish date:

Russia is claiming that it has developed and approved a "world first" coronavirus vaccine.

Before we get too ahead of ourselves and thinking that we're nearing the end of the COVID-19 pandemic, there are a number of issues with this claim.

If_Russia_Has_Indeed_Developed_A_Coronav-5f328953012f2f6a3d31cd4a_1_Aug_11_2020_12_26_49_poster

The first is whether or not it's even true. Russia has long been a hot bed of misinformation and the announcement could simply be the country attempting to position itself as a global leader in science and technology.

The second is whether or not the vaccine is either safe or effectiveness. Despite being approved by the Russian government, the vaccine supposedly has not even gone through a Phase 3 clinical trial, where it would be tested out on a large scale group of people. There also hasn't been any information or study material related to the vaccine.

In other words, we have a claim of a vaccine, but nothing really, at this point, to back it up.

Investors, however, in their never-ending quest for any kind of bullish news, are off and running on the news. Dow futures are up more than 300 points in a continuation of the rally that's been going on for nearly two weeks.

That's also been bad news for safe haven assets, including gold.

Precious metals had already been pulling back modestly off of their recent highs, but the Russia announcement has accelerated the trend.

GCY00_Barchart_Interactive_Chart_08_11_2020

Gold prices are already down more than $80/ounce over the past few trading days and there could be further downside ahead. If investors begin pivoting away from a more cautious sentiment into full-on risk-seeking mode, it could mean an extended pullback in defensive assets, including gold, Treasuries, utility stocks and the dollar.

Yields on the 10-year Treasury note are already up 5 basis points in early Tuesday trading and now sit about 0.11% above their recent low.

If a scenario plays out where investors remain bullish and the VIX continues falling (it's already down to 22 as I write this), it's easy to envision a scenario in which gold pulls back to $1900 in relatively short order.

More ETF Research

International Stocks Have Breakout Potential

Fed: Time To Let Inflation Run Hot

Top 5 Dividend ETFs To Watch In August

Gold ETF Cuts Its Expense Ratio To Compete With GLD And IAU

The VIX Could Be Getting Ready To Spike

Trend Investing: Can Video Game & eSports Stocks Continue To Soar?

If you liked this article/video, please click the LIKE button or share it on Twitter, Facebook, etc. using the buttons below.

Feel free to leave any comments, questions, or thoughts on the ideas presented here (and sign-up if you haven't already).

Follow me and receive periodic notifications when I post here by clicking the FOLLOW button at the top of the page!