How Might Fed Fears Affect Gold’s Movements?
The falls in precious metals have likely been extended due to fears that the Fed will increase the interest rate sooner than expected.
Precious metals fell for yet another day on August 25, 2016, after seeing two straight days of falls. Gold touched a four-week low of $1,321 on the day.
In January 2016, Russia’s central bank bought almost 22 tons of gold worth ~$800 million—the eleventh month in a row that it bought large gold volumes.
According to data by the WGC, the total demand for gold in the first quarter of 2016 has been 1,285.3 tons—much higher than the 1,075.6 tons we saw in 1Q15.
The Federal Reserve continued to send mixed signals over the liftoff phenomenon during the few past days. On Monday, August 22, precious metals slowly retreated and traded flat on Tuesday.
Recently, precious metals have been taking pressure from the US dollar. The dollar’s strength often makes precious metals weaker, as they are dollar-denominated assets.
Positive news on the economic front can make precious metals such as gold become weak and plummet.
The minimal rebound in gold also gave some breathing room to other precious metals, including silver, platinum, and palladium.
The possibility that US Fed chair Janet Yellen might support increasing rates as soon as September fueled the US dollar.
Gold futures for December expiration fell on Monday, August 22, their third consecutive fall.
The plummeting precious metals on Friday, August 19, 2016, were also a result of the comparative strength of the US dollar.
Gold fell by 0.8% to close at $1,346.2 per ounce on Friday. Silver, platinum, and palladium followed gold and retreated 2.1%, 1.3%, and 0.57%, respectively.
Plummeting precious metals on Wednesday, August 17, 2016, were also a result of the comparative strength of the US dollar.
Precious metals rebounded last Thursday, the day after the Fed meeting ended.
The president of the Fed Bank of San Francisco, John Williams, mentioned on Wednesday that it would make sense to return to a pace of gradual increases.
Among major mining shares, Newmont Mining (NEM), Coeur Mining (CDE), and Goldcorp (GG) retreated 1.4%, 1.2%, and 0.05%, respectively, on Tuesday.
There have been advances in US equities despite weak US economic numbers, and precious metals seem to be losing some of their haven appeal.
Uncertainty in the Markets due to the Brexit vote, the crude oil rout, and the Chinese turbulence played on gold and triggered a safe-haven appeal.
Gold broke the two-day losing streak and rose 0.42% on August 9. It closed at $1,346.7 per ounce. The price of gold was helped by the falling US dollar.
Renewed strength in the US labor markets wasn’t the only thing that affected precious metals on Friday.