Precious metal loss
After seeing massive gains, the precious metals tumbled on Tuesday, May 3, 2016. Gold, silver, platinum, and palladium fell 0.31%, 1%, 1.4%, and 2.6%, respectively. Gold fell after touching its 15-month high of $1,306 on Monday. Gold futures for June expiration closed at $1291.8 per ounce on Tuesday, May 3. After touching the $18 mark, silver returned to the $17 range and closed at $17.50 per ounce. However, the volatility in silver has been between 29% to 30%.
The fall in the precious metals was most likely due the strength the US dollar showed on Tuesday. The US Dollar Index (DXY) rose 0.14% on Tuesday after falling for six straight trading sessions. The index has fallen almost 1.4% during the last five trading days. The index was trading at 92.9 on Tuesday.
Precious metal prices and the US dollar are strongly correlated. The fall in the US dollar often makes dollar-denominated assets cheaper for investors, as they can buy the dollar at a comparatively cheaper rate with respect to their currency. The cheaper dollar means more bids for greenback assets. This leads to higher prices.
Miners and funds tumble
The rise in the dollar on Tuesday weighed on the precious metals and miners. The mining shares that fell on Tuesday include Pan American Silver (PAAS), Barrick Gold (ABX), and Coeur Mining (CDE). These three companies fell 1.9%, 3.8%, and 4.1%, respectively. Together, they make up 8.9% of the VanEck Vectors Gold Miners Fund (GDX).