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(Kitco News) - Just when you think the gold market can't get any more exciting, something happens that can still surprise you and the markets.

This time last week, the gold market was heading into the weekend with its best weekly gains since July. The market was getting comfortable with the idea that a Joe Biden administration would be able to get some much-needed stimulus through a divided Congress to support the beleaguered economy.

While the world was adjusting to the new political landscape in the U.S., it has also had to deal with surging growth in the COVID-19 pandemic. Infection rates have been rising faster than they did at the start of the pandemic, and many nations are introducing new lockdown measures. Last week the world was desperate for good news, and on Monday, they got it.

Early Monday, Pfizer and BioNTech announced a potential vaccine for the coronavirus, and the euphoria was felt almost instantly. Equity markets rocketed to new intra-day highs, and gold dropped $100, its worst one-day selloff in seven years.

While the selloff in gold is difficult to ignore, there is another aspect to Monday's price action that investors need to pay attention to a lot more: gold dropped sharply, but critical support at $1,850 held. During gold's worst day in years, the price managed to hold well above the July breakout.

Some analysts that I have talked to said that a potential vaccine is probably the worst news that could happen to gold, and now that is out of the way, it might be clear sailing to $2,000 an ounce by year-end.

Many analysts have noted that while a vaccine provides some hope for the future, we still have to face the current reality, which is that infections and the death rate are increasing, especially in the U.S. Analysts have noted that it could take months before a vaccine is widely available. There are also issues with the storage of the vaccine; it needs to be kept at -70 Celsius or -94 Fahrenheit. Pharmacies and even a lot of hospitals don't have those storage facilities.

Aside from logistical issues, analysts have also noted that the vaccine, once it is rolled out, doesn't deal with the devastation that the economy has already suffered. Since the spring, central banks and governments around the world have pumped trillions of dollars into financial markets to support the global economy. A vaccine won't dry up all that liquidity. Interest rates are going to remain at low levels for the foreseeable future.

All roads right now lead to gold," Ronald-Peter Stöferle, fund manager of Incrementum AG and one of the authors of the annual In Gold We Trust Report, told me in an interview this week. "The major inflationary driver going forward will be the COVID vaccine. This is a perfect environment for both gold and silver".

So there are still a lot of questions when it comes to COVID-19, and until they are answered, we will continue to deal with the economic fallout.

That is all for this week; have a great weekend.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.