How Precious Metals Tumbled after Trump’s Win



A 9% fall after Trump’s victory

Following Donald Trump’s victory in the US presidential election, gold has fallen nearly 9% from its peak. This tremendous slide has likely been due to the rise in the US dollar. All four precious metals except for palladium have been retreating. Gold, silver, and platinum futures have fallen 3.8%, 7.3%, and 7.3%, respectively, on a trailing-five-day basis. Palladium has risen 5.6% in the same timeframe.

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On November 14, 2016, Dallas’s Federal Reserve president, Robert Kaplan, said that the US central bank is on track to raise rates soon. This could put more pressure on gold and other precious metals, as they bear no yields. Many analysts are expecting increased spending by Trump to trigger a rise in inflation, which could ease the interest rate rise phenomenon.

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Precious metals funds

Gold- and silver-tracking funds such as the iShares Gold Trust ETF (IAU) and the iShares Silver Trust ETF (SLV) have also faced trailing-five-day falls of 4.1% and 7.5%, respectively. These funds have seen trailing-30-day losses, but they still have year-to-date rises of 15.3% and 22.1%, respectively.

Call-implied volatility, which measures the changes in the price of a call option with respect to changes in the price of the asset, rose for all four precious metals following Trump’s victory.

The miners that fell the most over the past few days include Primero Mining (PPP), Harmony Gold (HMY), Hecla Mining (HL), and Silver Wheaton (SLW). These funds have fallen 38.5%, 15.3%, 16.3%, and 19%, respectively, in the last five trading days. These four companies combined contribute about 7.8% to the fluctuations in the Market Vectors Gold Miners ETF (GDX).


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