Oil, inflation, and gold
Much of the price change in gold and the other three precious metals has resulted from inflation expectations. Inflation is reliant in part on fluctuations in oil prices. If oil prices drop drastically, inflation may also fall, which could decrease chances of a rate hike. Since higher interest rates negatively affect gold, a smaller probability for a rate hike could give some buoyancy to gold and other precious metals.
Outflow of funds
However, a December interest rate hike currently seems likely. Thus, precious metals are tumbling to lower levels. The fall in gold prices has negatively impacted funds flowing to the world’s largest gold-backed ETF, the SPDR Gold Trust (GLD). Its holdings fell 0.73% to 885 tons on Friday, December 2. There has been heavy selling in the ETF market primarily due to the increased strength of the dollar. The iShares Silver Trust (SLV) has also been negatively affected. GLD and SLV have fallen 10.3% and 9.1%, respectively, on a 30-day trailing basis.
Silver miners rose
The mining stocks that have survived the decline in precious metals over the past month include Pan American Silver (PAAS) and First Majestic Silver (AG). They have risen 9.3% and 14.7%, respectively. Both of these are silver mining companies. However, most gold miners like IAMGOLD (IAG) and Alacer Gold (ASR) have fallen on a 30-day trailing basis.