Silver Lining: Worries and Weak Data Keep Driving Precious Metals



Global worries for the United States

Gold prices scored the biggest monthly gain in January of all the precious metals, marking the biggest leap for gold in more than a year. Having risen 5.2% last month, gold recovered almost half the loss it suffered in 2015. Global unrest is spooking investors worldwide, so they’re jumping over to gold—the traditional favorite safe haven.

2015 saw increased pressure on gold prices as the Fed hiked interest rates. The Fed is also considering raising rates this year. But, given the global turbulence, the “gradual” pace of the planned rate hikes could turn out rather slower than “gradual.”

Article continues below advertisement

The Chinese market slump, weakness in Europe, and monetary easing in Japan are a few things that could substantially impact the Federal Reserve’s decision on a rate liftoff. In turn, this delay influences precious metals. Higher rates curb the appeal of these non–interest-bearing assets. However, a delayed rate raise would give them some breathing room.

Precious metals stand tall

A slew economic data came out on Friday, January 29, including the employment cost index and goods trading data. Though employment cost data came in flat and at the forecasted figure, the trade balance was -$61.5 billion. This number was lower than the expected -$60 billion.

Worries around the world and weak economic numbers could affect the Fed’s rate hike plan, pushing precious metals higher. All four precious metals rose on Friday. The SPDR S&P Metals and Mining ETF (XME) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) rose 7.4% and 2%, respectively. Mining stocks Agnico-Eagle Mines (AEM), Primero Mining (PPP), and Silver Wheaton (SLW) also rose 1.6%, 4.2%, and 6%, respectively.


More From Market Realist