What Fired up Gold before Easter?

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What Fired up Gold before Easter? PART 1 OF 5

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.

Gold Just Hit a Five-month High, and Here&#8217;s Why

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Dollar-denominated assets

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.

As gold and silver scaled higher on Trump’s comments, the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) rose 0.48% and 0.4%, respectively.

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).


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