Gold prices rise
On June 19, gold prices rose to the highest level in close to four weeks, trading at more than $1,203 per ounce. The rise came in response to the Fed’s decision to keep the interest rate near zero levels for the time being. This gave a lease on life to gold and other non-interest–earning precious metals.
An increase in the interest rate increases the opportunity cost of holding gold. An interest rate hike also increases the attractiveness of alternative interest-bearing assets such as bonds.
How are gold ETFs performing?
The SPDR Gold Trust (GLD), the ETF that tracks the price of spot gold, rose 1.8% in the two days after the Fed’s meeting last week. The VanEck Vectors Gold Miners ETF (GDX), on the other hand, rose 4.2% for June 17 and 18. However, the fund gave away some of the gains on June 19 when it fell by 2.4%.
In this series, we’ll be looking at factors like the latest Fed meeting and the impacts on gold prices. We’ll also see how developments in Greece are likely to affect gold prices. In addition, we’ll take a close look at the following factors:
- US labor market
- Shanghai Gold Exchange withdrawals
- gold ETF holdings
- CPI (Consumer Price Index) inflation
We’ll see how some of these factors impact the Fed’s rate hike decision. The Fed’s looming rate hike has been the single most important variable to impact gold prices lately.
These indicators should point you in the same direction as gold prices. They’ll also suggest movements in share prices for companies such as Goldcorp (GG), Royal Gold (RGLD), Silver Wheaton (SLW), and Kinross Gold (KGC). Combined, these companies account for 19.1% of GDX.