Gold prices plunged as stocks soared based on news that US-based pharmaceutical company Pfizer had a 90% effective Covid-19 vaccine trial.
However, market risk factors will remain until a vaccine is officially available to the public.
The price of gold dropped more than US$100 an ounce on Monday to a three-month low of $1,849 an ounce, then slightly rebounded to close at $1,868, above the strong resistance line. Yesterday it rose to $1,880 an ounce.
In contrast, stock markets around the world rallied following news that could lead to a recovery for the global economy to pre-Covid levels.
The SET index on Tuesday rose 4.31% to close at 1,341.24 points in trade worth 167 billion baht, making it the highest volume day of trade this year. The market was dominated by large-cap stocks, which included AOT (up 18.3%), KBANK (up 17.1%) and MINT (up 26.2%). Medical glove manufacturer STGT fell 21.7%.
The progress of a vaccine has had a strong correlation with gold prices because investors see gold as a stable asset when the market direction is uncertain. A successful vaccine is expected to return markets to a more predictable upward trend, causing investors to move funds to more risky assets like stocks.
Pfizer, in partnership with German drug company BioNtech, announced its late-stage trials found the vaccine 90% effective at preventing infection among those who have not yet been affected.
MTS Gold Futures chief executive Nattapong Hiranyasiri said gold prices will fluctuate in the short term, but should rise following three months as most countries continue with stimulus programmes or quantitative easing to increase liquidity, especially in the US where it will cause the US dollar to weaken in the medium term.
"As long as there is Covid-19 and the vaccine has not been distributed to enough people, stocks and gold prices will continue to fluctuate," Mr Nattapong said.
He said if the price of gold in the short term can stand above the support line of $1,800 an ounce, it has a chance to return to its record high. But if it falls below $1,800 an ounce, there is a chance of a downtrend.
YLG Bullion & Futures head of research Varut Rungkhum said the vaccine progress supported the stock market rebound.