What Caused Precious Metals to Tumble on September 11?
Precious metals slide
Gold prices slumped on Monday, September 11, as the US dollar witnessed a rebound against the world’s top currencies. The US dollar index (or DXY) increased 0.6% on Monday to close at $91.90. The dollar’s fluctuations have historically been influential on precious metals, which are based on the dollar.
A rise in the US dollar is often detrimental to these metals, as buyers from other countries must pay more in their home currencies to buy dollar-based assets. Similarly, a fall in the dollar index increases the demand for precious metals.
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With the rise in the dollar, gold slumped 1.2% to close at $1,331.80 per ounce on September 11. Silver also lost 1.2% to settle at $17.90 per ounce. Platinum was down 1.3% and closed at $998.80 per ounce. Palladium increased a marginal 0.04% to close at $935.90.
DXY and gold
The chart above shows the comparative price performance of gold versus the US dollar (UUP) over the past one-month period. A clear diversion in their price movements is visible as they share an inverse relationship.
The rise in the US dollar was likely due to the weaker-than-expected impact of Hurricane Irma over Florida. Also, the decreasing concerns over North Korea’s missile test during the weekend prompted the US dollar’s rise.
The dollar’s rise also resulted in the decline of the precious metal mining shares B2Gold (BTG), Goldcorp (GG), Newmont Mining (NEM), and New Gold (NGD). These four mining shares were down 2.9%, 2.5%, 2.8%, and 4.6%, respectively, on September 11.