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Could Buying Gold Give Burns to Investors?



A fall below the $1150 mark

With nothing else that could affect precious metals as much as the FOMC’s (Federal Open Market Committee) meeting, precious metals heavily retreated after the indication of a December hike. Gold touched its three and a half month low and fell below the $1150 per ounce mark. Experts were looking forward to the selling of gold that would pick if the price broke the key level of $1150 per ounce. However, the reaction was muted, and the buying only slightly pulled from the lower levels.

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 Better physical demand

Physical demand in the second half of the year has been better compared to the first six months of the year. The reason being that the price fell to a six-year low in July. If investors flock to gold with the fall in prices, and if the Fed in December sees a sagging US economy, and we have a possible further delay in raising the rates, then gold may once again fall to lower levels.

But the pace of buying has slowed as uncertainty over the timing of a US rate hike has clouded the metal’s price outlook. The chart above shows a three-month price performance for gold.

Gold-silver ratio

The gold-silver ratio determines the number of silver ounces it needs to buy a single ounce of gold.  The gold-silver ratio, or spread, gained 1.38% on Thursday after the December liftoff news came out on the market. The rise in the ratio likely signifies that gold is gaining strength comparatively to silver.

The ETFs that saw a fall in their prices on a five-day trailing basis include the SPDR Gold Shares ETF (GLD) and the iShares Silver Trust ETF (SLV). These two ETFs fell by 1.8% and 1.5%, respectively. The mining companies that fell on a five-day trailing basis include GoldCorp (GG), New Gold (NGD), and Royal Gold (RGLD). These companies together make up 14.1% of the VanEck Vectors Gold Miners ETF (GDX).


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