Precious metals react to the rate hike
The Fed raised the interest rates. The markets expected a negative reaction from commodities including precious metals. Precious metals like gold, silver, platinum, and palladium don’t bear any cash flows like Treasuries. As a result, the rising rate was expected to pull the precious metals lower. However, the metals yawned right after the FOMC’s (Federal Open Market Committee) monetary policy setting meeting on December 16. The precious metals rose instead of falling.
On December 17, the precious metals woke up. They fell after the rate hike. Gold, silver, platinum, and palladium fell by 2.5%, 3.8%, 3.6%, and 2.5%, respectively.
The above chart shows the price performance of gold futures on Wednesday—the day the Fed increased the interest rates.
Tracking ETFs and miners
The fall in the precious metals was also replicated in the ETF investment and the mining sector. The SPDR Gold Shares ETF (GLD) fell by 2.2% and settled at $100.5 per share on Thursday. The Global X Silver Miners ETF (SIL) fell by 5.6% on the same day.
The loss in the mining-based ETFs was due to the losses in individual mining companies like Alamos Gold (AGI), First Majestic Silver (AG), and B2Gold (BTG). These three companies fell by 1.5%, 10.8%, and 2.7%. They closed at $3.2, $3.05, and $1.08 per share on Thursday. Together, they account for about 3.2% of the price changes in the VanEck Vectors Gold Miners ETF (GDX). GDX fell by 5.9% on Thursday, December 17.