Where Did You Gold? - Moderna, the Life of the vaccine party

The vaccine rotation trade got another burst of momentum overnight, with Moderna's Covid-19 vaccine preliminary data indicating a 94.50% effectiveness. More importantly, it can be stored in a beer fridge, and not in Antarctica, making distribution logistics exponentially easier. We are likely to get other companies releasing preliminary data before the year-end. However, with two viable candidates, even if others fail, the vaccine party will still carry on into the early morning hours. 

The release of the Moderna results saw another spurt of buying flow into super spreader sectors such as airlines. Interestingly, the work-from-home side of the market held its own, with all three Wall Street leading indices finishing higher overnight. With Covid-19's biblical comeback crashing over Iran, Russia, all of Europe, the US and Mexico, and others I'm sure I've missed, we will all still be working from home for some time to come, vaccine or no vaccine. 

Restrictions continue ramping up in Europe, with the Swede's the latest to join in. The situation in the United States is particularly worrisome, with new state-wide restrictions seemingly every day. The election stand-off is complicating the picture, and it seems inevitable that US economic data will suffer into Q4. America matters as 25% of global GDP. 

That all points to more policy easing by the European Central Bank and the Federal Reserve in December. They won't be alone. Awash in a world of increasing torrents of zero per cent money and bond backstopping from the Fed, a weaker US Dollar and further asset (read stock market), price appreciation seems inevitable. The arrival of Covid-19 vaccines appears to be making the "buy everything" trade, literally "buy everything." Except for the US Dollar, that is, 2021 will not be kind to the debased greenback. 

Gold holds trendline support

Gold spiked lower after the Moderna announcement, falling to trendline support at $1864.50 an ounce. It quickly recouped those losses to finish at $1888.80 an ounce, as lucky a number in Asia as you are ever likely to see. All the more impressive was that gold rallied even as the US yield curve steepened. 

After the trauma of the post-Pfizer price action, gold has now held its ascending trendline support three times over the past week. It suggests the momentum has now swung to the topside, especially with more easing from the Federal Reserve almost certain.

Gold's initial topside target is the $1905.00 to $1907.00 region, its 50 and 100-DMA's, followed by $1935.00 an ounce. The ascending trendline support is at $1866.50 an ounce today, followed by the $1850.00 an ounce zone. A loss of $1850.00 an ounce would target a more significant retreat to the 200-DMA at $1789.00 an ounce.

One caveat to the bullish outlook is that gold has yet to de-correlate itself from aggressive equity market selloffs. I am loath to call the low for gold until it survives something like a Trump-tweet surprise that torpedoes equity markets violently.