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Precious Metals This Week: Call It a Comeback?

PART:
1 2 3 4 5 6 7
Part 3
Precious Metals This Week: Call It a Comeback? PART 3 OF 7

The Rebound of Precious Metals on Wednesday, May 10

Wednesday’s rebound

After tumbling on Tuesday, May 9, precious metals once again stabilized on Wednesday, May 10. Gold (IAU) revived from an eight-week low, increasing 0.23% and closing at $1,218.9 per ounce. Its call implied volatility, which measures the variations in the price of an asset with respect to the changes in the price of a call option, dropped to nearly 9%.

The other three precious metals—silver, platinum, and palladium—followed the same route as gold and climbed on Wednesday, rising 0.87%, 1%, and 0.72%, respectively. Silver (SLV) closed at $16.2 per ounce, and its call implied volatility dropped to 16.3%. Platinum and palladium closed at $909.4 and $799.4 per ounce on May 10.

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Factors playing gold

In contrast to gold, silver prices have been unstable for the past six months. Silver is known to be more volatile than gold, likely due to its lower price. Silver is commonly known as poor man’s gold and has a higher trading volume.

Meanwhile, the revival in the US dollar has also been crucial in determining the direction of precious metals (see Part 4).

The Fed

According to the CME Fed Watch Tool, there’s now a nearly 90% chance that the US Federal Reserve will raise the interest rate at its June 13–14 meeting. This, of course, would mean more bleeding among precious metals.

At the same time, this negative sentiment for precious metals over the past month has also caused a drop among mining funds and shares. As of May 10, 2017, Alacer Gold (ASR), B2Gold (BTG), Barrick Gold (ABX), and Alamos Gold (AGI) have seen trailing-30-day losses of 25.1%, 18.4%, 15.8%, and 20.8%, respectively.

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