Can Gold Free Itself from Its Rate Hike Shackles?

Gold eases once again

Gold prices eased on Thursday, December 10, 2015, after seeing a rebound effect for the past two trading days. Gold futures for February delivery lost almost $3 and closed at $1,072 per ounce, 0.42% lower than the previous day’s close. Other precious metals also retreated. Silver dropped 0.56% and closed at $14.1 per ounce. Platinum and palladium also slipped 1.1% and 1.8% respectively. Palladium has been the most sensitive precious metal, and it saw the most gains and losses on the day.

For months, gold prices have been tied to the Fed’s lift-off decision. Gold has suffered in the later half of 2015 due to the possible interest rate hikes that will curb the appeal of non-interest bearing assets like bullion.

Can Gold Free Itself from Its Rate Hike Shackles?

What happens after the hike?

There are many other macro drivers for gold, silver, platinum, and palladium. However, none of these factors seem to be in play for now as the Federal Reserve decision is just around the corner. Most market participants expect the rate hike to take place at a comparatively slower pace, as the rest of world is still easing and expanding its economy. Once the Fed gives its verdict on the hike, gold and other precious metals may be set free and begin to rise slowly in 2016. Gold has a high demand backing from the East, as discussed in the article Gold Rises in the East, while silver, platinum, and palladium may surge due to industrial demand.

The possible rise in the precious metals after the mid-December Federal Reserve meeting may also lift ETFs like the Global X Silver Miners ETF (SIL) and the iShares Gold Trust (IAU). Mining companies like Hecla Mining (HL), Kinross Gold (KGC), and IamGold (IAG), which have seen drowning share prices, may also rebound due to the gains in precious metals. These three companies together make up 5.4% of the VanEck Vectors Gold Miners ETF (GDX).