Precious Metals versus Overall Markets in 2015



Economic uncertainty

Worldwide financial markets experienced sluggishness in 2015, fueled by the growing unrest in the Chinese markets. The Grexit in the middle of the year dragged down the equity markets, but it was unable to give the right push to precious metals.

Some factors that affected the financial markets in 2015 included stocks and commodities. The terrorist attacks in Paris pulled down the market sentiment, enhancing the safe-haven appeal of precious metals—albeit temporarily.

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The recent growing unrest between Russian and Turkey also shook equities and commodities. The commodities market indicator S&P GSCI (Goldman Sachs Commodity Index) fell about 25% in 2015. Gold and silver rank seventh and sixth, respectively, on a year-to-date basis. The index contains 24 commodities, including crude oil, gold, wheat, and copper.

Growing dollar strength

The European Central Bank (or ECB) is on easing spree until Europe stabilizes its economy. The euro tumbled about 15% against the US dollar in 2015. While Europe is set on a monetary easing path by way of cutting interest rates, the US seems to be the only nation in a monetary tightening phase.

The gradual rise of rates, as recommended by the Federal Open Market Committee, is strengthening the dollar. The increase of the dollar subdues the appeal of the commodities market in general, as all commodities are dollar-denominated.

Mining sector affected

Like other commodities, precious metals have suffered due to the growing strength in the dollar. This led to the fall of 9.7% and 9.2% in gold and silver, respectively. The Sprott Gold Miners ETF (SGDM) and the iShares Silver Trust ETF (SLV) have also suffered, falling 24.2% and 9.1%, respectively, on a year-to-date basis.

Among the precious metals miners, Eldorado Gold Corp. (EGO), Pan American Silver Corp. (PAAS), and Alamos Gold Inc. (AGI) have been substantially affected, losing 45.9%, 24.2%, and 48.6%, respectively, on a year-to-date basis.


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