Why Did Gold Have the Best Month in Almost 4 Years?

Precious metals had a down day on February 26, 2016. Gold, silver, platinum, and palladium fell by 1.5%, 3.5%, 1.3%, and 0.27%, respectively. The bounce back in the equity markets was likely an important factor backing the losses of these safe-haven assets. Palladium fell the least. Usually, it reacts as an industrial metal instead of a precious metal.

The loss in these precious metals also resulted in a loss in mining-based ETFs like the Global X Silver Miners ETF (SIL) and the leveraged Direxion Daily Gold Miners ETF (NUGT). These two indexes fell by 1.9% and 10.6%, respectively.

Despite the losses on February 26, the precious metals maintained substantial gains for February. Gold rose by 10% during February. This makes it the best month in almost four years.

The high inflows in gold-based funds, the economic unrest extending from China, the oil market slump, the rattled financial market, and the diminished hope of another rate hike from the Fed all helped the safe-haven demand for gold. This caused gold to rise. Hedge funds and money managers also raised their bullish bets on gold. The money flow into the bullions continued. This indicates more positive sentiment.

The rise in precious metal prices helped the mining sector. The mining stocks that rallied during the past month include Harmony Gold (HMY), Pan American Silver (PAAS), and Royal Gold (RGLD). Together, these three stocks account for ~7% of the price changes seen in the VanEck Vectors Gold Miners ETF (GDX). GDX rose by 31.5% during February.