Gold finally broke its longest losing streak in a while on Tuesday, May 31, increasing by 0.08% and closing at $1217.5 per ounce. Silver and platinum retreated by 1.7% and 0.18%, respectively, on the same day, whereas palladium rose by 1.5%.
Although gold had an up-day, market sentiment remained increasingly negative as hedge funds and money managers decided to take a breather from gold. After a roaring start for gold in 2016, mid-2016 appears pessimistic.
Most investors are washing their hands of gold as the increased fear of an interest rate hike in the US is gripping financial markets. A higher rate of interest shadows gold because it’s a non-yield bearer and underperforms amid rising rates. Investors could slowly drift toward yield holders like equity and Treasuries, shunning gold and causing a fall in prices.
The rise in gold boosted the gold-based SPDR Gold Shares (GLD) by 0.38%, whereas the fall in silver resulted in a loss for the silver-based iShares Silver Trust (SLV). Both these funds have seen losses in May, falling by 6.1% and 10.5%, respectively, on a 30-day-trailing basis.
The stocks that fell the most include New Gold (NGD), Kinross Gold (KGC), and Gold Fields (GFI). These three shares lost 10.3%, 12.9%, and 11.6%, respectively, on a five-day-trailing basis. These three stocks combined make up 9.1% of the VanEck Vectors Gold Miners Fund (GDX).
Notably, ABN Amro analyst Georgette Boele mentioned that the next crucial support level for gold would be around its 200-day moving average of $1,163 per ounce. Gold could remain low until the US Fed’s meeting in June and move according to US market sentiments.