Why Did Precious Metals Have a Choppy Week?



Choppy week

Gold fell for the sixth straight day on October 7, 2016. Gold initially edged higher on Friday ahead of the US non-farm payrolls. However, it ended the day negative. It fell 0.07% and closed at $1,251.9 per ounce. The volatility in gold also rose for the day by 14.2%. However, silver managed marginal gains for the day and ended at $17.4 per ounce.

The previous trading day was negative for precious metals. The past week was substantially choppy for precious metals. Gold, silver, platinum, and palladium rose 3.7%, 5.8%, 3.5%, and 5.7%, respectively, on a trailing five-day basis.

Metals were pressured by the gain in the US dollar. The US Dollar Index posted its biggest weekly rise since November this week. Upbeat US jobs and manufacturing data reinforced expectations that the Fed would lift interest rates this year.

The precious metal–based funds like the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) also fell 4.7% and 8.8%, respectively, over the past five trading days.

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The mining companies that also saw their share price fall include Silver Wheaton (SLW), Aurico Gold (AUQ), AngloGold Ashanti (AU), and Yamana Gold (AUY). These four companies fell on Friday and carry five-day trailing losses. Combined, these four miners make up about 14.2% of the fluctuations in the VanEck Vectors Gold Miners Fund (GDX).

As we know, gold is highly sensitive to rising US interest rates. It increases the opportunity cost of holding non-yielding metals, while boosting the dollar.


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