Gold price dropped $100, or 4.5% on Monday as Pfizer announced that its COVID-19 vaccine is 90% effective. The S&P 500 climbed 2.9%, the Dow is up 3.8%, and the NASDAQ is up only 1%, dragged down by companies that benefit from the work from home culture, like Zoom (-12%) and Netflix (-4%). Peter Hug, global trading director of Kitco Metals, said that these moves factor in expectations that are a bit ‘premature’.
We're speaking with Peter hug, global trading director of kickoff Meadows on Monday. It's a rough day for the metals. Gold is down four and a half percent, but equities are up the S and P 500 is up more than one and a half percent. The Dow Jones is up 4%. The NASDAQ is up 1.2%. Discretionary sectors are seeing a relief following news from Pfizer that a vaccine is coming and in the works.
Peter, how would you describe the markets in one word? Pick one word I'd probably say for neck. Okay. Yeah. So, so let's, let's walk through this, Peter, what exactly? Let's start with gold. What is gold reacting to right now? Well, I, I mean, it's a, I think it's a knee jerk reaction. I, I, uh, the news this morning was phenomenal, uh, from the perspective of humanity, uh, Pfizer came out and announced that they had a vaccine for COVID 19 with a 90% efficacy rate, uh, which, which matches the efficacy rate for, for.
Um, uh, diseases such as measles and smallpox. So I, I mean, um, even Fowchee indicated that if they got a 50% efficacy rate, that would be, um, that would be a game changer. So the, the market is euphoric and, um, they think, uh, that, uh, That COVID is going to be, um, uh, contained and, uh, we'll, uh, see like back to normal sometime in 2021.
Uh, and in that context, uh, uh, you know, I think what the metals markets specifically are, are. Thinking, uh, I think it's premature. Uh, but our thinking is that, well, uh, you know, now with the vaccine coming out, the economies are going to reopen and, um, there's going to be a resurgence and, uh, another stimulus package is not necessary.
And on that point, I totally disagree. But that's what the markets are proceeding. Uh, so, uh, they're uh, selling mirror, safe Haven assets, their risk, uh, they're they're, uh, protection assets, gold, silver, uh, and, uh, chasing the stock market. You have the, you know, the equity markets up the belt at one point was up 1600 points this month.
You don't think gold is reacting at all to Biden's a confirmation of presidency over the weekend. Well, I think, uh, I think gold, uh, was going to have a bit of an issue, um, with Trump, not, um, conceding the election, uh, because, uh, you know, the metals were looking, uh, and still are looking for, uh, for another stimulus package.
And with, uh, Trump not conceding the election, it's difficult for Biden to put anything on the table and start the work of a government when he takes over in January. So, uh, the stimulus package was up in the air prior to the announcement of the vaccine this morning. Now, personally, I think the announcement of the vaccine and or Biden, uh, or Trump, uh, again, depending on how that plays out, um, taking over the white house.
Uh, a stimulus package is absolutely necessary because even with the, uh, the, um, the news that of Pfizer this morning, uh, based on their numbers, they're talking 25 million doses by the end of this year. Uh, that's a worldwide number, uh, and then a significant number in 2021. So there is still a time window here, probably three to six months before there is any effective volume of dose, uh, that is available, uh, to the general public.
Uh, and in that context, uh, COVID is still roaring, uh, you know, 120,000 cases a day in the us. Well, I think it's absolutely essential that there's another bridge that is created by the government, uh, for fiscal stimulus, uh, to get us to the point where the vaccine is readily available. And so that becomes the question, Mark, uh, and, uh, We need to know who is going to run this country in January.
Uh, and until that becomes more clear, the, uh, stimulus package is, uh, uh, remains a question Mark. And as long as it remains a question Mark that will continue to put pressure on, um, in my opinion, the equity market and, uh, the metals markets in the short term. Okay. So if you think it's going to put pressure on the equities markets and metals markets.
Well, the equities markets seem to be, uh, you know, they, they, they seem to not price in that risk today as we're seeing right now. So do you think that what we're seeing in the NASDAQ, the down the S and P 500, do you think those indices are overreacting to the Pfizer news? I think it's premature. Uh, I mean, you can see the NASDAQ not participating in this rally, uh, because they're selling the stay at home stocks and, and people are starting now to buy the airlines and cruise ships and, uh, you know, the theme parks and the hospitality industry.
And again, on, in anticipation of that, everything is going to be, uh, you know, hunky Dory in 2021. And I assume if Pfizer's results are accurate and we can get the vaccine out that sometime in 2021, this industry will come back. I just think right now it's premature. I don't see anybody jumping on a plane or booking, cruise ship, uh, tickets.
Uh, but, but it's, it's, it's sort of a euphoric knee jerk response. I mean, people are excited about this. Uh, and, uh, you know, they want to get on with their normal lives. So that's the natural reaction is to, uh, is to jump in on these, uh, stocks that have been beaten down and especially in the hospitality industry.
You're right. So, uh, American airlines, I'm looking right now as I speak as up 14. 14% zoom is down 16%. So a lot of these work from home accompanies where companies have benefited from the work from home culture. Uh, the stocks are dragging down the NASDAQ. The next X should have been up a lot more. Have these stocks not gone down now, do you think that we're going to stop seeing a work from home culture anytime soon because of this vaccine news?
No. I mean, I don't think anybody is sending their employees back to the office until we have the vaccine. And again, I think that's going to be an event that'll happen probably sometime first, second quarter of next year, uh, before people feel safe enough to go back to work and to, you know, associate in small groups.
So, again, it's a timeline type of event. Uh, and I, uh, you know, I understand that euphoria and, and sort of the reaction on the news. Uh, but I, uh, again, think it's premature now from the work at home stocks, I do think they are going to take a hit in 2021. If we get back to a normal economy, But, uh, you know, a lot of companies have figured out that, you know, they can work from home and, and, uh, this is very cost-effective for them.
Uh, you know, first of all, they save on rent, uh, uh, you know, there's a number of savings for corporations. If they can keep a number of their workforce working from home. So I'm not sure this, this trend goes away completely. Um, It'll certainly come back. Uh, you know, and, you know, instead of let's say nine out of 10 workers working from home, now I can, I anticipate there'll be at least four, maybe five out of 10 workers, even with the vaccine.
Uh, when the economies go to full gun, um, that we'll continue to work from home, uh, because, uh, you know, people are getting used to it. It's effective, it's efficient and it's a corporation. I think markets need to remember that the, uh, vaccine drug from, uh, Pfizer needs to still go through FDA approval. It hasn't been approved yet.
That process still needs to be in place. So, uh, that, that may take a while. Yeah, it may, but I think FDA is going to be behind this. If they come back with a 90% efficacy, I can see the FDA not approving it. It's not so much approving the drug. I think that's probably going to be a done deal. It's a matter of how quickly can it get out to the public?
Uh, and will the public take it first of all, uh, and how quickly will it get out to the public so that there is a very strong sense that you're safe when you go back in to the economy. And again, I think we're. The news is phenomenal. I don't want to downplay the news and it's the best news I've heard, uh, in a year.
But, um, we, we have to be careful that we're not ahead of the curve here in the enthusiasm. Okay. Here's what I don't understand is that we, we knew a vaccine was in the works. We knew eventually one day we would have it. So why is there such a knee-jerk reaction today? Is it just sentiment? Well, yeah, I mean, you can expect something, but the train.
You know, the, these companies were in trials. Uh, there still wasn't, uh, you know, anything on the immediate horizon that suggested that something of this magnitude with 90% efficacy, uh, was going to come out. And I mean, uh, even the critics of, of, of sort of these trials, Have been extremely positive today.
I mean, this is extremely good news. I mean, I'm not trying to diminish it at all. Uh, and the reaction in the market is, is, uh, a knee jerk reaction. It may follow through. Uh, but I think it's premature. I don't think the valuations justify where, uh, you know, uh, a Dow at 29 five. No, and it certainly doesn't justify the extent of the metal sell off that scene.
So let's sum up your thesis and talk about trays. Now, Peter, you said that, uh, the reaction is premature from the equity side. You set that on the gold side, uh, grit log in fiscal stimulus may put downward pressure in the medium term, uh, factoring in these theses. How would you be trading this week going into next week?
I'm convinced, uh, uh, that, well, I'm not convinced because I don't know what's going to happen with, uh, with this Trump Biden issue. Uh, if I had a. Strong amount of certainty that the Republicans would back off and Biden would be the president of that. Uh, I would, uh, believe strongly that a stimulus package is absolutely crucial com whether it'll be 2 trillion in dollars, like it was expected to be three weeks ago prior to the election.
Uh, it will, in my opinion, still be necessary to bridge the gap. For companies that are still not open, uh, and struggling, uh, until the vaccine, uh, allows the economy to reopen. And I think that hot time window is a three to six month window. So we need a bridge and, uh, uh, on the basis that I believe that, uh, that bridge will be an additional stimulus package.
Uh, I continue to be constructive. The metals. Yeah, Pfizer is up 8% today. It's actually not up as much as the, uh, uh, some of those discretionary stocks, like, uh, American airlines. Okay. So, uh, what about gold then? Do you see a trend reversal for gold and actually equities as well? Or do you continue to see downward pressure putting gold to, uh, its lower support levels?
Well, I think 1850 is going to be tested. I think it was tested once today. Uh, I think that's a significant support level for gold on the cash market. Uh, if we lose 1850, uh, I think 1825 is a given. Um, and, uh, again, if it's euphoria, uh, Continues if we lose 1825, but if you're looking for levels a again, I think there's a possibility of seeing gold South of 18 testing, the 1785 level.
Um, uh, so that's the support line on the resistance line. Um, You're going to need to get all the way back up over 1925 before the, uh, uh, the technical charts, uh, uh, indicate a move higher. Uh, you know, we indicated last week prior to the election, there was a possibility gold might nudge up around 2000, right?
It was close, got to 1970. Uh, but this news this morning was a game changer and everybody bailed and, uh, It's very rare to see gold move a hundred dollars down in one day. Uh, and, uh, you know, Silver's given up about a dollar 60, um, since the open. So, uh, this kind of momentum, uh, Could feed on itself as, as, uh, as their stop-losses are triggered and people get called on margin that we're along this position.
So there might still be some selling in this market. Uh, I'm hoping for a bounce at 1850, but if we lose that, I think 1825. So I've given him a short time. And when you're looking at the moving averages and the volume did, does a momentum indicate to you more downward pressure or upward pressure right now, as we speak.
Well, it's already moved 90 and $95, uh, and it bounced off 1850. So, uh, again, I'm going to be of the camp that it holds 1850 today. Uh, if we lose 1850, then the downward pressure is going to accelerate because there's going to be, um, There's going to be all go, uh, selling, uh, stop-loss computer selling on a breach of 1850.
Um, but it can move all the way down to 1780 ish, um, before it breaches the 200 day moving average. Uh, so that would be ultimate support at that level. Um, And again, I see no reason for this market to completely tank here. Uh, you know, you still have, uh, the fed that is going to have, uh, their foot on the, on the gas pedal, right through 2021.
Uh, there's no reason for them to change that. Um, so I'm anticipating that, uh, any significant dip in the metals markets are the last thing I want to bring up is oil. It's also up. Nine and a half percent as we speak crude oil. So that indicates to me that, uh, uh, aggregate demand is expected to pick up. Is that correct?
Again, perception. Yeah. You know, everybody's going to get on an airline. Airlines are going to fly more planes, going to need more fuel. More people are going to be comfortable. They're going to get in their cars are going to drive, going to go see their relatives. Uh, so, uh, you know, all of that anticipation of demand for the energy sector, uh, again, is, uh, is the psychological pop and, uh, you know, people buy oil.
There's absolutely nothing. That's changed in the supply demand equation for oil today as of Friday. Uh, but it's the perception that all of this will come back and there's going to be significant demand and the price that a $40 or $37 a barrel where it was on Friday, uh, is, uh, is under, uh, It's under priced and, uh, you know, oil should be closer to 50 or 60 because we're going to have an economy that looks pre COVID very shortly.
Again. I believe it's a premature trade. If I were trading this market, I'd probably buy puts on oil here. Uh, not because I'm bearish the, uh, the economy. I'm just thinking it's premature to, uh, to have oil pop-up, uh, 10%. On the story that there's going to be a real getting of the U S economy sometime in 2021.
All right, Peter. Thanks very much for your thoughts. Excellent. As always, I look forward to speaking with you again soon. Thank you. It was a pleasure, David. Thank you. Thank you for watching Kitco news. We'll have more for you. Stay tuned for updates. .