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Gold Prices Rise, Gaining from US Dollar Index’s Weakness

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Mar. 17 2016, Published 6:36 p.m. ET

US markets traded flat as commodity prices fell

US markets were trading on a strong footing on March 17, 2016. Janet Yellen, the Federal Reserve’s chairperson, noted that strong growth in the labor markets, coupled with moderate economic growth, would drive the central bank in increasing rates in the future, although it was mindful of the slow demand in the global arena. An increase in crude and other commodity prices helped in raising investor sentiment.

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In terms of major releases, US job openings increased by 5.54 million in January, meeting estimated forecasts and above the previous month’s release of 5.28 million. The S&P 500 Futures Index rose by 0.80%. Also, the NASDAQ Futures and the Dow Jones Industrial Average rose by 0.27% and 1.1%, respectively, at 3:00 PM EDT.

Gold prices move up on cut in rate hike expectations

On March 17, 2016, gold and other precious metals were trading on a higher note. Precious metal prices took their cues from the Federal Reserve’s indication that any interest rate hikes would consider global economic growth factors. Policymakers are expected to raise rates twice this year as inflation levels begin to pick up and macroeconomic indicators improve. A weaker US dollar index, which fell by almost 1% on March 17, was also a driver toward increasing gold prices.

The longer the Fed holds interest rates down, the better it will be for gold prices because of the inverse relationship between US treasury yields and gold prices. The iShares Gold ETF (IAU) was trading slightly lower on Thursday by 0.08%, and the SPDR Gold Shares ETF (GLD) fell by 0.32%.

Impact on ETFs across sector SPDRs

The majority of the SPDRs were trading on a positive note on March 17, 2016. As for sector-specific SPDRs, the SPDR S&P Metals & Mining ETF (XME) was the outperformer among major sector-specific ETFs and rose by 4.0% on March 17 at 3:00 PM EDT.

The Industrial Select Sector SPDR ETF (XLI) and the Materials Select Sector SPDR ETF (XLB) also traded higher by 2.4% and 2.0%, respectively. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) was trading higher by 2.0%.

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