How Precious Metals and Miners Performed in Beginning of August

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How Precious Metals and Miners Performed in Beginning of August PART 1 OF 4

These Factors Have Boosted Gold Prices

Rebound in precious metals

Among the top determinants of the fluctuations in precious metal prices are market unrest, geopolitical tensions, US dollar movement, macro data from the US, and changing interest rates. Gold has risen a whopping 1.9% over the past five trading days, while silver has risen almost 2%. Platinum and palladium have also risen 3.4% each during the same timeframe.

The below chart depicts how the past few weeks have been for gold and silver. Among the determinants that we mentioned, the US dollar has been the most important element in the recovery of precious metals. The DXY Index has dropped 0.89% on a five-day trailing basis and 2.9% on a 30-day trailing basis.

These Factors Have Boosted Gold Prices

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Dollar-denominated assets

The US dollar and precious metals are negatively correlated most of the time. In the long run, this inverse correlation will likely continue. When the dollar drops, it becomes easier for investors from other countries to buy the cheaper dollar, and thus the demand for dollar-based assets rises.

During the start of this week, Fed vice chair Stanley Fischer mentioned that uncertainty over the outlook for US healthcare, regulation, taxes, and trade could lead to many firms delaying their projects until the policy environment clears. This uncertainty could have also given a bounce to precious metals.

The rise of the metals could also lead to the revival of mining shares like Royal Gold (RGLD), Alamos Gold (AGI), B2Gold (BTG), and First Majestic Silver (AG). The SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) also rebounded.


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