What Caused Precious Metals to Plummet?
Precious metals slumped
Precious metals fell on Thursday, March 2, 2017, as the US dollar firmed. Gold futures for April expiration settled at $1,232.6 an ounce, almost 1.4% lower than the previous day’s close. Thursday’s fall was the biggest one-day fall since December 2016. Silver amplified the drop in gold and receded 3.8% to settle as low as $17.70 per ounce. Platinum and palladium plummeted 3.2% and 1.2%, respectively. These two metals closed the day at $982.50 and $765.70 per ounce, respectively, on Thursday.
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Interest rates and gold
The decline in precious metals was most likely due to the stronger data that came out of the US on Thursday. The next article contains details about the data released on Thursday and its impact on precious metals.
The above graph shows the relationship between gold and interest rates on US Treasuries. The higher interest rates surge, the lower the demand for precious metals, as these metals offer no intermediary payments.
Miners and funds
The possibility of a March interest rate hike is likely playing on these metals, and thus they plummeted. The fall in these metals also caused the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) to tumble. These two fell 1.2% and 3.7%, respectively, on Thursday.
Agnico Eagle Mines (AEM), Sibanye Gold (SBGL), Gold Fields (GFI), and Primero Mining (PPP) also fell on Thursday by 3.8%, 4.6%, 3.8%, and 4.9%, respectively. Combined, these four miners make up about 11.8% of the fluctuations in the VanEck Vectors Gold Miners Fund (GDX).