The Fed Didn’t Raise the Interest Rate—Why Is Gold Crashing?



Gold and silver headed south

Gold futures on COMEX (Commodity Exchange) for October delivery plunged 1.03% and touched the mark of $1100. The last closing price for gold as of September 30, 2015, was $1115 per ounce, which is much lower than the 20-day moving average price of $1123.07.

Silver, too, took a plunge of 0.38% and closed at $14.51 an ounce. Just like gold, silver prices are moving south and trading lower than their 20-day moving average of $14.738. Gold and the US dollar are known to have an inverse relationship, as shown in the above chart. The US Dollar Index (DXY) Currency measures the value of the US dollar relative to other major foreign currencies.

The dollar, too, dropped marginally on September 30, by 0.08%. However, it has a five-day trailing gain of 0.46%, and gold has traded nearly flat, losing a negligible 0.01%.

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Positive news

According to Reuters, jobs figures revealed that private companies in the United States created 200,000 jobs last month. These numbers are significantly higher than expected and show that the domestic employment market is in good health. Full non-farms payroll statistics are in-line to be published.

In the wake of the Federal Reserve’s member speaking and showing notes of a looming increase in rates, gold may be expected to stay in a narrow range until the final verdict.

Gold mining ETFs like Sprott Gold Miners ETF (SGDM) and iShare MSCI Global Gold Miners ETF (RING) have both lost significantly on a YTD (year-to-date) basis and on a 30-day trailing basis. However, these ETFs had five-day trailing gains of 2.6% nd 2.8%, respectively.

Mining companies that saw the biggest gains on September 30 include Eldorado Gold (EGO), First Majestic Silver (AG), and AngloGold Ashanti (AU). These three stocks together account for 9.2% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).


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