How the Dollar Affected Gold on October 4
Gold rose on Wednesday, October 4, 2017, after having touched its seven-week low price of $1,269.2 an ounce. Gold futures for November expiration were 0.16% higher than the previous day’s close and ended at $1,275.2 per ounce. Silver, however, maintained its downward streak and dropped 0.16% to end at $16.6 per ounce. Platinum fell 0.05% to close at $911. Palladium resurged at 0.3% to close at $921.05 per ounce.
The rebound in gold was mainly due to the drop in the US dollar on Wednesday. The US dollar lost strength against the world’s major currencies as speculation about Donald Trump’s choice of the next Federal Reserve chair captured interest. The DXY Index, which prices the dollar (UUP) against a basket of six major world currencies, fell 0.12%.
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Fund and miners’ reaction
The above chart shows the relationship between gold and the dollar. These indicators are negatively correlated to each other, as gold is a dollar-based asset. The rise of the dollar causes investors from other countries to move away from the dollar, and thus the demand for dollar assets is also negatively impacted.
Similarly, a fall in the dollar gives a positive kick to gold and other dollar-denominated metals. The dollar rise has been negative not only for the metals but also for the precious-metal-based funds and mining shares. The iShares Gold Trust (IAU) and the iShares Silver Trust (SLV) have fallen 0.65% and 0.88%, respectively, on a five-day trailing basis. The DXY Index has risen 0.10% during the same timeframe.
Mining stocks usually follow metals and funds, but that hasn’t been the case over the past few days. Major mining stocks like Royal Gold (RGLD), B2Gold (BTG), Goldcorp (GG), and Newmont Mining (NEM) have risen 0.14%, 3.2%, 4.3%, and 2.3%, respectively, on a five-day trailing basis.