The US Dollar Emerges Strong, Precious Metals Fall
The strength of the US dollar impacts precious metals significantly.
Gold and other precious metals plummeted on Friday. Gold, silver, platinum, and palladium fell by 0.54%, 0.42%, 1.4%, and 0.7%, respectively.
Gold futures for June expiration saw another day of losses, falling by ~$4 and closing at $1,222.7 per ounce on May 26, 2016.
DXY surged by 0.74% on a 30-day trailing basis. During the same time frame, precious metals continued to have a downward sentiment.
The prices of precious metals have been declining over the past week. Gold, in particular, has been affected significantly.
The macroeconomic events that have been affecting gold include factors like a potential interest rate hike by the Federal Reserve and a potential Brexit.
It’s likely not only gold’s fundamentals that have influenced major banks, but also the global scenario as a whole.
HSBC analysts have determined that historically, gold has risen for at least 100 trading days after the first hike by the Federal Open Market Committee.
After seeing three straight years of losses, gold (GLD) performed extremely well at the beginning of 2016.
When analyzing gold’s price movement, it’s crucial to consider major bankers. Goldman Sachs has been increasingly pessimistic about gold’s future prospects.
Everything that plays well for the US economy likely plays well for the US dollar, too. The US dollar and gold, or for that matter all precious metals, have a close-knit relationship.
Another day of losses continued for gold on Friday, May 20, 2016. Gold futures for June expiration declined 0.15%, falling marginally $2 and closing at $1,252.90 per ounce.
Precious metals are highly sensitive to interest rate hikes, which increase the opportunity cost of holding non-yielding precious metals.
William Dudley has pointed to a hawkish June FOMC meeting, which sent jitters to the financial markets and caused a steep slide for gold.
Gold touched its three-week low on Thursday, May 19, 2016. The fall was an extension of the previous day’s trade. So what’s the reason behind the drastic fall in gold?
Central banks around the world are affecting the movement of gold with their monetary policies.
While Druckenmiller didn’t explicitly give an investment recommendation, he did strongly hint at buying gold.
According to a government filing on Monday, May 16, the value of Soros Fund Management’s publicly disclosed holdings dropped by 37% to $3.5 billion as of the end of 1Q16.
One of the main reasons behind the fall in precious metals on Wednesday, May 18, 2016, is the stabilization of the US dollar.
Many mining-based funds and mining stocks amplify the returns in precious metals. SGDM and SIL lost 7.7% and 6.8%, respectively, on Wednesday.