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Could Appointment of Next Fed Chair Move Precious Metals?

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Could Appointment of Next Fed Chair Move Precious Metals? PART 1 OF 4

What Factors Could Be Playing Precious Metals?

The next Fed chair

Gold was trading moderately high on Wednesday, October 25, 2017. It rose a marginal 0.04% and closed at $1,276.30 per ounce. Platinum was 0.13% higher and ended at $924.30 per ounce. Silver and palladium, however, had a down day, falling 0.24% and 0.32%, respectively. Silver closed at $16.90 per ounce, and palladium ended the day at $959.50.

Although these metals had a mixed performance on Wednesday, they all have fallen during the past week, largely due to the rise in the US dollar. The equity markets have been cautious, and the United States is now waiting for new leadership for the Federal Reserve. The appointment of the next Fed chair may have an impact on gold and other precious metals, but probably only for a short time.

Any changes to interest rates could also have an impact on precious metals. A hike in interest rates is often negative for gold and silver since they have no intermediary cash flows.

What Factors Could Be Playing Precious Metals?

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Geopolitical risks

The above chart shows the historical move of gold (IAU) (SLV) in relation to the US two-year and ten-year rates of interest (SHY) (IEF).

Lately, geopolitical risks such as the North Korean unrest have taken a back seat, and haven bids seem like they’re no longer able to support gold and other precious metals. That has led to a decline in gold- and silver-based funds. The iShares Gold Trust (IAU) and the iShares Silver Trust (SLV) have fallen 0.16% and 0.31%, respectively, on a five-day trailing basis.

Mining shares that have also fallen include Kinross Gold (KGC), Iamgold (IAG), Barrick Gold (ABX), and Yamana Gold (AUY).

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