How Does Economic Sentiment Affect Precious Metals?
Much of the fluctuation in precious metals is due to economic sentiment from financial reports. On Thursday, the final GDP number, which measures the annualized change in the inflation-adjusted value of all goods and services, came in above analyst expectations of 2%. The GDP was at 2.1%, suggesting growth in the US economy.
Also, first-time unemployment benefits in late March dropped by 3,000 to 258,000. However, the forecasted figure was 244,000. The unemployment claims measure the number of individuals who filed for unemployment insurance for the first time during the past week.
Interested in SHY? Don't miss the next report.
Receive e-mail alerts for new research on SHY
Contrasting factors for precious metals
Another important phenomenon that is affecting the precious metal market is the Federal Reserve’s stance on future interest rate hikes. New York Federal Reserve president William Dudley reinforced the notion that the US is on the road to a tighter monetary policy after having hiked interest rates twice in three months.
The rising interest rates (SHY) (IEF), as shown in the above chart, are harmful to non-yield-bearing assets like gold (IAU) and silver (SLV). However, the failure of the Republican healthcare reform and fears that Donald Trump won’t be able to implement policy changes he promised are improving the outlook for precious metals.