The strength of the US dollar impacts precious metals significantly. The DXY (US Dollar Index) measures the dollar’s strength against a trade-weighted basket of these six major currencies: the euro, the yen, the pound, the Canadian dollar, the Swedish krona, and the Swiss franc. The US dollar has increased during the past month. DXY surged a whopping 3% on a 30-day trailing basis. It gathered gains of 0.72% on a five-day trailing basis and increased 0.41% on Friday.
The exclusive rise of the US dollar on Friday is due to Janet Yellen’s optimistic speech, which hinted towards a sooner-than-expected interest rate rise for the United States. Higher interest rates often attract investments from around the globe and the country’s currency could rise. The US dollar rose following Yellen’s comments, pushing dollar-denominated gold lower.
Dual game on gold
Higher rates and a higher US dollar both negatively impact gold. Gold has lost about 6.9% during the past month. It experienced the longest losing streak this year, with nine straight days of losses.
The fall in gold and other precious metals affected mining funds, with the VanEck Gold Miners ETF (GDX) and the Global X Silver Miners ETF (SIL) falling by 2.9% and 3.7%, respectively, on Friday, May 27.
Silver Wheaton (SLW), Yamana Gold (AUY), and Primero Mining (PPP) fell by 4.9%, 11.7%, and 10.3%, respectively, on Friday. Together, these three shares contribute to 9.6% of the fluctuations in the VanEck Gold Miners ETF (GDX).