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How Did Friday’s Meeting Impact Metals and Miners?

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Hawkish comments

At the much-awaited meeting on August 26, Fed Chair Janet Yellen seemed assertive on increasing the interest rates. However, she pointed towards a gradual pace. Fed Vice Chair Stanley Fischer also suggested that rate hikes were on track and seemed rather hawkish. Gold touched the day’s high of $1,346. However, Fisher’s comments likely pulled it lower again.

Yellen pointed towards improvements in the US labor market and moderate economic growth. These could be the backbone for a rate hike. However, as expected, she rested the case of a liftoff on future economic data.

The above graph shows gold’s performance as well as the US Treasury two-year and ten-year interest rates.

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Miners fell

As we know, rising interest rates pose weakness for precious metals because they’re non-yield bearing assets. These non-yield bearing assets fall as the opportunity cost of holding these metals rises.

Mining-based companies retreated with such a hawkish stance, even though metals marginally remained high. The mining-based shares that fell the most on Friday include B2Gold (BTG), Sibanye Gold (SBGL), and Aurico Gold (AUQ). These three miners fell 2.7%, 3.5%, and 2.8%, respectively, on Friday. Together, these three miners contribute about 4.8% to the price changes in the VanEck Vectors Gold Miners Fund (GDX).

Funds that follow gold and silver had a mixed reaction. The silver-based iShares Silver Trust (SLV) rose 0.51%, while the gold-based iShares Gold Trust (IAU) fell 0.16%.

Falling prices resulted in a buying spree in Asia for precious metals, especially gold and silver, with the nearing festive season.

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