Global factors affecting precious metals
Growing economic instability and concerns about the delayed liftoff of US interest rates pushed up precious metal prices. Gold, silver, platinum, and palladium all saw prices rise after a terrible month of staggeringly low prices. Owing to a likely delay in liftoff, gold, silver, platinum, and palladium rose by 0.81%, 3.7%, 2.01%, and 0.47%, respectively, on August 10.
Gold trading volumes toward the middle of last month were at ~25,000. With prices on an upswing currently, volume is as much as ~150,000. Rising prices are likely pulling more participants into the precious metals futures market.
Gold prices had been declining during the past few weeks. The decline came on the likelihood that interest rates would be raised by the FOMC (Federal Open Market Committee) in September. Then the Chinese yuan was devalued to support exporters.
The devaluation is likely to spur industrial activity, catering to the possible increase in demand. So the unexpected move by the People’s Bank of China may now delay the rate hike once again. And gold and other precious metals generally rise when this happens. As seen in the above chart, gold typically has an inverse relation with US real interest rates.
Exchange-traded funds surge
Miners took a hit with the steady decline in precious metals prices over the past year. The SPDR S&P Metals and Mining ETF (XME) and the Sprott Gold Miners ETF (SGDM) fell 33.7% and 24.72%, respectively.
August 10, however, was a green day for most mining companies as well as miner ETFs. XME and SGDM rose 6.45% and 6.7%, respectively. Mining companies also rose on the note about liftoff being postponed. Barrick Gold (ABX), Goldcorp (GG), and Agnico Eagle Mines (AEM) rose ~5.8%, 6.85%, and 7.24%, respectively. These stocks together make up 17.33% of the VanEck Vectors Gold Miners ETF (GDX).