Are Rising Global Concerns Helping Precious Metals?



Surging precious metal prices

Gold futures for December delivery rose 1.7% last week and saw a high for the week on Friday, October 8, of $1,159.30 an ounce. Silver climbed 1% last week, reaching its highest price of $16.12 an ounce. Platinum surged 7.7% last week. Palladium added 2.6% in the last week, making it the best-performing precious metal with a gain of 19.7% on a 30-day trailing basis. It is the longest rally since July 2014 for palladium.

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Money managers have increased their net-long positions in precious metals for the third straight week, helping to fuel a rally among these metals. Global growth concerns are stemming and the US is facing unsure labor markets. A forecast by the International Monetary Fund for slower global expansion is adding economic worry.

The S&P Goldman Sachs Commodity Index rose about 5.4% on a 30-day trailing basis. The index includes 24 commodities listed on it. Gold underperformed in comparison to other commodities. The above chart compares the gold price movement alongside the changes in the commodity index for 2015.

Tracking the miners and ETFs

Precious metals investments that have seen a rise in their prices in the last month include the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV). These ETFs have seen increases of 4.4% and 8.4%, respectively. Similar to the rise in bullions, mining companies have also seen a surge in their prices. Alamos Gold (AGI), First-Majestic Silver (AG), and IamGold (IAG) have seen their prices rally. These three companies contribute 2.5% to the VanEck Vectors Gold Miners ETF (GDX).

Minutes from the FOMC (Federal Open Market Committee) September policy meeting, released on Thursday, highlighted risks from the slowdown in China and its potential spillover effects to other economies. The Chinese slowdown also affected the US’s net exports, further weakening the economy. As a result of the turmoil, the Fed decided to push back the rate hike. According to data from the US Commodity Futures Trading Commission, combined net-long positions in gold, silver, platinum, and palladium rose 38% in futures and options contracts in the seven days ending October 6.


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