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Factors Playing on Gold and Other Precious Metals

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Gold and silver rose

Gold futures prices edged higher on Wednesday, December 28, 2016. The short covering in precious metals likely helped the prices stay afloat. February expiration contracts rose almost $2 and closed at $1,140.90 per ounce. Silver rose about 0.31% and closed at $16 per ounce. Platinum and palladium, however, were trading lower by 0.48% and 2.0%, respectively.

Gold is about to end the year at an 8.0% rise for 2016 after hitting its ten-month low on December 15, 2016. The rising rate of interest on Treasuries is a major reason that gold prices have fallen in the last quarter.

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Factors that played a role

Another important factor that has been playing on precious metals is the rise of the US dollar. On Wednesday, December 28, 2016, the US Dollar Index rose, although gold and silver also rose. Expectations of more interest rate hikes by the Fed in 2017 are also adding to optimism for the US dollar. This factor has a negative impact on gold and other precious metals.

Gold- and silver-based funds such as the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV), which have closely followed precious metals, fell during the last quarter of 2016. Assets in GLD, the world’s largest gold-backed ETF, fell to 823.4 tons on Tuesday, December 27. The holdings fell about 13.0% after Donald Trump won the US presidential election.

Mining shares also suffered during the same time period, including Alamos Gold (AGI), First Majestic Silver (AG), PanAmerican Silver (PAAS), and IamGold (IAG).

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