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Strong US Dollar Pressured Precious Metals

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Dollar gains strength

For the second week now, the US dollar has been the primary driver of the price changes in the commodities markets. The December US dollar index futures closed at their highest level since August 21, up 2.8% to 97.2. Growth in the US dollar picked up as China reported slower economic growth at 6.9%. Later in the week, European Central Bank president, Mario Draghi, gave dovish comments on the economy, further discussing rate cuts and surprising investors.

Draghi’s comments weakened the euro and provided some stimulus to the US dollar. More news from the East on Friday further strengthened the US dollar as precious metals dropped. Gold futures on COMEX for December delivery fell 0.28% and closed at $1,162.80 an ounce on Friday, October 23, 2015.

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Tracking ETFs and miners

Other precious metals like silver and platinum also retreated 0.06% and 1.1% to close at $15.80 and $1,002 an ounce, respectively. Palladium, however, showed a little strength and gained 1.2% to settle at $693.80 per ounce. The rising US dollar not only led to a decline in the commodities, but also the commodities’ complementary currencies like the Canadian dollar and the Australian dollar.

ETFs backed by precious metals like the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) have also seen a decline on a five-day-trailing basis owing to the downfall in their core assets. Both saw a fall of 0.88% and 1.1%, respectively. Most mining stocks saw a gain in their prices. As a result, the VanEck Vectors Gold Miners ETF (GDX) also surged 2.5%. Companies like Silver Wheaton (SLW), Sibanye Gold (SBGL), and Yamana Gold (AUY) saw their prices rise 3.8%, 5.6%, and 3.3%, respectively. These three stocks together make up 11.2% of the GDX indicator.

The next article will discuss in detail the PBOC’s easing decision and its impact on precious metals.

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