Why Did Precious Metals Fall?



Precious metals fell

Precious metals fell lower on Wednesday after the Federal Reserve committee meeting. Gold, silver, platinum, and palladium dropped 0.6%, 1.1%, 0.8%, and 1.9%, respectively. The Fed’s stance often sends all four metals in one particular direction.

Gold closed at $1,348.8 per ounce after touching the day’s low at $1,340.5. Gold, however, didn’t fall further due to the Fed’s mixed reviews. The call implied volatility in gold did, however, increase due to the anticipation of the Fed’s outcome.

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Falling positions in gold

Not only did gold reverse its gains, the net long position in gold futures and options also fell about 4.3% to 255,773 contracts as of the week ending August 9. August hasn’t been as good for gold compared to the previous few months.

Miners followed metals

The decline in the precious metals also resulted in a drop in the mining funds and equities. Barrick Gold (ABX), Coeur Mining (CDE), and Kinross Gold (KGC) fell 2.2%, 2.1%, and 1.8%, respectively, on Wednesday. These three stocks take direction from gold and silver. Together they make up 10.4% of the price fluctuations in the VanEck Vectors Gold Miners Fund (GDX).

The mining funds like the Sprott Gold Miners (SGDM) and the iShares MSCI Global Gold Min (RING) also take direction from the metals and thus have seen a five-day trailing loss of 1.6% and 1.1%, respectively.

In our next article, we’ll discuss the impact of the US interest rate policies and the Fed meeting stance on the precious metals.


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