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'Gold's story is not over': Rallying stocks don't mean investors forgot their fear - RBC Capital Markets

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(Kitco News) A rally in the stock market does not mean investors have forgotten their fear, which is why "gold's story is not over yet," according to a report by RBC Capital Markets.

"After a precipitous vaccine news-driven decline, gold's current price levels still leave unanswered questions," RBC's commodity strategists wrote last week. "Despite seemingly buoyant markets, we do not think that investors have forgotten their fear; thus gold's story is not yet over amid ongoing the economic, financial and political uncertainty.

Vaccine news does not automatically fix the economic downturn the U.S. has seen this year. It does not solve all the other problems, including inflation and unemployment, the report noted.

"2020 has been a year of uncertainty, underscored by a pandemic, an economic crisis, heightened political tensions, and a confluence of gold-positive drivers. While we may have seen a reset of sorts in gold's valuation, its path is not predetermined as we barrel towards 2021," the strategists said.

Last Monday, Pfizer/BioNTech vaccine news saw gold prices tumble $100, followed by step-by-step recovery. This Monday, Moderna's vaccine news also sent gold sown more than $25. But this time around, losses were very quickly recovered.

At the time of writing, December Comex gold futures were trading at $1,891.00, up 0.25% on the day.

Gold's drop last week represented "a reset of gold-related pandemic expectations, a repricing of stimulus expectations by gold investors, a realignment of inflation fears, and a shift in mindset around post-election political uncertainty," RBC strategists pointed out.

But this reset does not mean gold's moves higher are over, they added.

"Gold's story is not over yet in our view, even if there is a perceived 'light at the end of the tunnel.' While perhaps a near-term overcorrection, this reset may have helped gold find a new equilibrium," the strategists wrote. "Yet even after the first vaccine shipments, there will still be distribution and uptake challenges. Thus the health crisis will not come to an immediate close."

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