How Much Is Gold Taking Performance Cues from the Dow?

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Part 3
How Much Is Gold Taking Performance Cues from the Dow? PART 3 OF 5

What Caused the Fall in Precious Metals?

Precious metals drop

Gold prices plummeted on Wednesday, January 25, 2017, and gave the lowest close in recent weeks. Gold futures for February expiration gave up nearly $13 from its previous day’s close, ending the day at $1197.8 per ounce. The other three precious metal counterparts followed the same lines. Silver dropped to almost $16.9 per ounce on the same day, while Platinum and palladium fell 1.6% and 3.3% to close at $980 and $760 per ounce, respectively.

The main gold and silver funds, the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV), also witnessed tumbling prices on January 25. As the chart below shows, gold has been comparatively more vigilant in price fluctuations in January.

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Mining shares that often take clues from changes in precious metals rather than from the overall market include Barrick Gold (ABX), Newmont Mining (NEM), Alamos Gold (AGI), and First Majestic Silver (AG).

Upcoming Chinese New Year

Gold had hit two-month highs during the past week, rising almost 8% since mid-December. Concerns regarding Trump’s future policies likely boosted haven bids for precious metals. As we know, gold is famous for its safe haven appeal, especially during rising times of uncertainty and geopolitical and financial unrest.

Another potential explanation for the decline in gold is the upcoming lunar New Year festival in China. The diminishing demand for gold during the past few months may have also pulled down prices. But usually, demand rises higher than it has before the Chinese New Year.


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