The development of Covid-19 vaccines has stopped the gold price in its tracks. Once the year's best investments, returns are starting to dwindle as the pandemic's end edges closer. Is this the end of the gold bull run?
Since Pfizer’s vaccine announcement on November 9 – soon followed by similar news from Moderna and AstraZeneca – the gold price has fallen from almost $2,000 (£1,495) an ounce to just over $1,800, a 7pc drop, pulling its gains down for the year to 19pc.
With vaccine optimism is growing and an economic recovery is in sight, will the gold price drop further, or is this wave of selling just a blip in the precious metal's upward trajectory?
Telegraph Money analyses the immediate and longer term outlook for the yellow metal.
Short term – gold falls further
The vaccines have decreased the appeal of a safe haven assets and increased the appeal of beaten-up “value” stocks which will benefit from an economic recovery, according to Paul Jackson, of investment manager Invesco.
The gold price now depended on how long it would take to distribute vaccines around the world. "If they are rolled out quickly, then this could cause the gold price to fall," he said.
The extent of the economic damage from the ongoing wave of lockdowns would also have an impact.
"If economies are in better shape than expected, this would be bad for the gold price. The reverse is also true," he added.
Another factor in the short term is the outcome of the American election.
“If Donald Trump continues to resist handing over power, the uncertainty could boost gold. However, when Joe Biden is in the White House, I would expect gold to decline,” said Mr Jackson.
Long term – gold rises
Analysts expect the gold price to increase in the long term because inflation will rise and interest rates will stay low.
Shaniel Ramjee, of Pictet Asset Management, said high debt levels would encourage central banks to keep interest rates low and let inflation rise. This would reduce the burden of outstanding government debt.
Inflation is good for the gold price. Gold is fixed in quantity (apart from what is mined every year), which means that more money chasing it should lead to a rise in its price.
Near-zero interest rates are a positive for the gold price. When the yield from cash or low-risk government bonds are high, the appeal for gold, which yields nothing, diminishes. The reverse is also true, and low or negative yields push safety-seeking investors towards the metal, pushing up its value.
Evy Hambro, of investment manager BlackRock, said interest rates were the key to understanding the direction of the gold price and therefore gold would keep rising in the future.
He added that not a lot of gold will be mined in the coming years due to a lack of investment in finding more sources. This will keep supply fixed and boost its price, he argued.
However, Mr Jackson refuted this view. He said: “I expect gold to be lower by the end of 2021 because a strong economic recovery will weaken its price.
"Even if inflation did returned it would not boost the gold price. Since the 2007 financial crisis inflation has gone down and the gold price has gone up. I think it would need a significant rise in inflation to change that relationship, something I do not expect,” he said.