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After Gold's Biggest Decline Since November, What Next?

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After Gold's Biggest Decline Since November, What Next? PART 1 OF 4

Gold’s Biggest One-Day Decline Since November 2016

Another day of decline

Precious metals remained in a slump on Thursday, May 4. Gold and silver both dumped 1.6% and 1.5%, respectively, while platinum and palladium were marginally higher and rose 0.37% and 0.17%, respectively. But gold saw its highest fall in a single day since November 23, 2016.

Specifically, gold shattered its shorter-term 50-day moving average and the longer-term 200-day moving average mark last Thursday. After touching the lowest level of $1,225.7 per ounce, gold ended the day at $1,228.6 per ounce.

Gold&#8217;s Biggest One-Day Decline Since November 2016

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Silver also tumbled to $16.2 per ounce before closing at $16.3. Silver has been the biggest loser among precious metals over the past week and has given up 6% on a five-day-trailing basis. Platinum and palladium ended the day at $907.3 and $800.7 per ounce, respectively.

The fall in precious metals stemmed from the rising probability of another interest rate hike by the US Federal Reserve. Analysts are expecting at least two more rate hikes in 2017, and the rising interest rate, as we know, negatively impacts precious metals because these metals offer no interest or cash flows.

The plunging dollar

Meanwhile, the US Dollar Index once again rose on Thursday, May 5, after seeing a slight rise on Wednesday. The US dollar, which is depicted by the DXY Index, has fallen about 3% since the beginning of 2017. To be sure, it’s generally expected that the US dollar (UUP) will rise with any increase in the rate of interest offered on US Treasuries, and the rising dollar and the rising interest rate will likely play negatively on precious metals as they are dollar-denominated assets.

Notably, the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV)—both famous funds—have lost about 3.3% and 5.3%, respectively, during the past 30 trading days.

Mining shares also plummeted on Thursday, May 5, due to these declining metals. Among the biggest losers that day were Yamana Gold (AUY), Primero Mining (PPP), Eldorado Gold (EGO), and Pan American Silver (PAAS), which fell 8.6%, 5.4%, 4.6%, and 4.2%, respectively.

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