How the Fed Is Controlling Precious Metal Prices

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How the Fed Is Controlling Precious Metal Prices PART 1 OF 5

What’s Giving Direction to Precious Metals?

The March hike hovers

Precious metals fell again on Friday, March 3, 2017, after the Thursday slump. The most important factor playing on precious metals is the Federal Reserve’s interest rate phenomenon. Interest rates and precious metals are inversely related since precious metals offer no cash flows. The higher the yield on Treasuries, the lower the demand for non-yield bearers such as gold and silver. Thus their prices suffer.
In the graph below, you can see the performance of gold alongside the US ten-year and two-year interest rates.
What&#8217;s Giving Direction to Precious Metals?

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Mining shares rebounded

On March 3, 2017, gold fell about 0.52% for the day and closed at $1,225.50 per ounce. Silver closed at $17.70 per ounce that same day. Palladium joined gold and silver and fell 0.18%, closing at $767.90 per ounce. Platinum is the only precious metal that rose. It ended the day at $992.60 per ounce, a 0.42% rise.
Although most precious metals fell on March 3, miners rebounded from their previous day’s loss. Iamgold (IAG), Alacer Gold (ASR), Eldorado Gold (EGO), and Pan American Silver (PAAS) rose 5.0%, 3.4%, 2.1%, and 1.2%, respectively. Combined, these four miners make up about 7.3% of the fluctuations in the VanEck Vectors Gold Miners ETF (GDX).
The iShares Gold Trust (IAU) and the iShares Silver Trust (SLV), which follow gold and silver, respectively, fell 1.7% and 2.4%, respectively, last week on a five-day trailing basis.

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