Gold Just Hit a Five-month High, and Here’s Why
Gold at five-month high
Gold hit a five-month high on Thursday, April 13, 2017. Gold futures contracts for June expiration were $7.1 higher at $1,285.2 per ounce that day—the strongest level seen by gold since November 2016. Silver, however, ended the day flat at ~$18.5 an ounce, a little lower than its five-month high of $18.6. Platinum and palladium traded 0.4% and 0.1% higher, ending the day at $972 and $797.4 per ounce, respectively.
The most important factor on Thursday that led to the rise of the precious metals was the US dollar. President Trump noted that the US dollar seemed too strong, and this presumably led to its decline. Below, the US dollar is depicted by the DXY currency index, which prices the dollar against a basket of six major world currencies.
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Changes in gold and other precious metals have been widely dependent on the US dollar in 2017. The dollar has fallen 1.6% YTD (year-to-date). But weakness in the dollar often gives some breathing room to dollar-denominated assets. As gold is a dollar-based asset, it becomes cheaper when the dollar depreciates. In the short term, this inverse relationship can vary, but in the long run, the relationship is generally expected to hold true.
The major mining shares of Goldcorp (GG), Newmont Mining (NEM), Agnico-Eagle (AEM), and Barrick Gold (ABX) all had a down day on April 13, despite the gains in precious metals, falling 0.71%, 1.7%, 1.1%, and 1.9%, respectively. Together, these miners make up 24.6% of the VanEck Vectors Gold Miners ETF (GDX).