Bull case for gold remains despite coronavirus vaccine

• Gold prices retreated last week on Pfizer’s vaccine news
• Price was trading around $US1,880 on Friday – buying opportunity?
• TD Securities and Royal Bank of Canada say macro case remains strong

Gold prices have dipped following positive news about Pfizer’s coronavirus vaccine candidate – but a number of analyst say the bull case for gold remains.

The Royal Bank of Canada and TD Securities last week both made the case for gold even as it tested a crucial support level around $US1,850 an ounce on Pfizer’s news.

“Vaccine should ultimately be a boon for gold bugs, as the Fed could keep nominal rates capped while inflation expectations could firm further as a result,” TD Securities strategists wrote on Wednesday.

RBC meanwhile said in a note to clients on Thursday that while investor flows to gold had levelled out, an effective vaccine would take time to distribute, the economy would take time to recover and political uncertainty remained a worry.

“We believe that there is still a clear appreciation for gold amid all the uncertainty that still persists,” the bank said. “Gold’s story is not yet over in our view.

“All of the reasons for gold strength over the past few months are still in place. The horse has left the barn,” Bryan Slusarchuk, CEO of mining company Fosterville South Exploration, told CNN last week. “People are looking at gold as an alternative currency.”

Gavin Wendt, the Sydney-based founding director and senior resource analyst with Minelife, agrees.

He told Stockhead that central banks have been buying gold and “there’s every indication there is going to be more government stimulus.

“That creates a fantastic environment for gold.”

He said in the near-term it could push past $US2,000 an ounce and hit $US2,200 or $US2,300 next year.

“Ten percent upside – that’s easily achieved,” he said.

In the medium-term, Wendt believes the yellow metal could reach $US2,500 or $US2,800 within the next three to five years – “with the possibility the price could surprise to the upside,” given how central banks seem to be abandoning inflation targets.

“Their current strategy seems to be inflating away debt,” he said.

Wendt said that higher-cost miners would stand to benefit the most from higher gold prices.

Stockhead | Derek Rose