Precious Metals Advanced on Rate Hike Uncertainty



Precious metals enter the green

On Friday, October 9, 2015, precious metals saw a green day. All precious metals settled at prices above what they had previously seen. Gold held close to the technical resistance level and touched a high of $1,159.30 per ounce. It closed $11 above the previous close with a gain of about 1%. Gold likely rose due to the retreating US dollar.

The DXY Currency Index has given up 1.4% on a five-day trailing basis. At the same time, gold has advanced 1.8% on the same basis. The figures show the strong inverse correlation between gold and the US dollar. Gold futures have likely seen a technical support level close to $1,100 an ounce.

Timing of the rate hike

The September job data has likely had a substantial impact on the Fed’s rate hike decision. The weak figures are raising concerns over the growth of the US economy. The upcoming October FOMC (Federal Open Market Committee) policy meeting will shed some light on when investors can finally expect the rate hike.

In US equities, the Dow Jones Industrial Average and the S&P were each up 0.1% while the dollar was 0.8% weaker at 1.1 against the euro on Friday. The likeliness of further delay in the hike has put weight on the US equity markets as well as the US dollar. However, the uncertainty has seemed to bolster gold and other precious metals. Silver, platinum, and palladium have gained 0.97%, 7.7%, and 2.7%, respectively, on a five-day trailing basis.

Precious metal ETFs like the iShares MSCi Global Min (RING) and the VanEck Vectors Jr. Gold Miners ETF (GDXJ) have gained 12.2% and 7.5% on a five-day trailing basis, respectively. Rising prices also boosted companies that are engaged in mining precious metals. Companies like Yamana Gold (AUY), B2Gold (BTG), and Pan American Silver (PAAS) have seen an increase in their prices in the last five trading days. These three companies make up 7.3% of the VanEck Vectors Gold Miners ETF (GDX). GDX itself saw a whopping 12.2% gain on a five-day trailing basis.

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