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Precious Metals React to Rate Hike, Jobs Report

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Part 3
Precious Metals React to Rate Hike, Jobs Report PART 3 OF 4

Behind the Slump in Precious Metals Last Thursday

Precious metals tumble on rate hike probability

Last week’s interest rate hike led to a fall in precious metals on Thursday, June 15, 2017. Gold fell ~1.7% and touched a low of $1,251.7 per ounce before settling at $1,253.0.

The call implied volatility in gold also dropped to 8.8% that day, and silver and platinum slipped 2.5% and 3.2%, respectively. Silver settled at $16.7 per ounce, while platinum ended at 921.3 per ounce. Palladium continued its uptrend, rising 0.48% and closing at $861.8 per ounce.

Behind the Slump in Precious Metals Last Thursday

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The fall in these dollar-based assets was most likely due to the strength of the US dollar (UUP), as depicted by the DXY Currency Index. The index jumped 0.51% higher on June 15 over the previous day’s close, as the latest jobs data came in strong and supported a positive outlook for one more interest rate hike in 2017.

Unemployment claims drop

The most recent US unemployment claims report stood at 237,000—much lower than the analyst expectation of 241,000. This figure measures the number of individuals who filed for unemployment insurance for the first time in the previous week. Such hopeful numbers signal a growing economy and also increase the chances of another interest rate hike in 2017.

Precious metals, as we know, are negatively impacted by higher rates of interest. The fall in these metals on Thursday also pulled down the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV), which saw falls of 0.42% and 0.44%, respectively.

Mining shares had a mixed reaction after the Wednesday slump. The miners that fell the most include Hecla Mining (HL), Sibnaye Gold  (SBGL), Primero Mining (PPP), and AngloGold Ashanti (AU), which dropped 4.7%, 4.9%, 4.1%, and 3.9% respectively, on Thursday, June 15.

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