How the Economic Numbers Are Playing Precious Metals
Among the economic numbers that came out on Thursday, September 28, was the US GDP. The final GDP data figures express the annualized change in the inflation-adjusted value of all goods and services produced by an economy. The latest US GDP stood at 3.1%, which was just higher than the analyst expectation of 3%. Unemployment claims reached 272,000—marginally higher than the analyst expectation.
These numbers from the world’s strongest economy gave hints to investors that an interest rate hike by the Federal Reserve could be on its way.
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Gold versus interest rates
As precious metals (SHY) (IEF) do not bear any intermediary cash flows for investors, a higher yield offered on Treasuries could lure the investors out of safe-havens like gold into the yield-bearing assets. This could have a negative impact on gold and mining stocks like Sibanye Gold (SBGL), Harmony Gold (HMY), Coeur Mining (CDE), and Gold Fields (GFI).
Analysts are expecting a strong performance from palladium this year due to the strength of the Chinese automobile sector, and palladium prices have now caught up with platinum prices for the first time since 2001.
Remember, platinum is used in diesel-based vehicle engines, while palladium is used in gasoline-based engines. The recent move from diesel engines to gasoline engines may have helped the rise in palladium.