How Janet Yellen’s Statement Affected Precious Metals



Yellen’s testimony

Janet Yellen, the chair of the Federal Reserve, said on Tuesday, February 14, that the US economy could likely be on a growth path and that the Fed could increase interest rates as early as its next meeting. Her hawkish comments hurt gold, and it fell to $1,222.1 an ounce to end the day at $1,223.9 per ounce. The call implied volatility in the metal also dropped to 11.6%.

The other three precious metals were, however, trading higher as compared to the previous day’s close. Silver, platinum, and palladium were 0.38%, 0.19%, and 0.77% higher, and ended the day at $17.9, $1,000, and $781, respectively.

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Yellen suggested that the Fed will be looking at the employment numbers from the US. If the results meet analyst expectations, the interest rate hike could be sooner than expected. With inflation at its target, it seems to be the right time for an interest rate hike. However, Yellen also noted the considerable uncertainty about economic policies during the Trump administration.

Impact on miners

Precious metals are negatively affected by interest rate hikes. The higher the interest soars, the lower the demand for the non-yield bearing assets like gold and silver. The changes in gold and silver also impact funds like the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV). These two funds saw a rise of 0.08% and 0.71%, respectively, on Tuesday.

The mining shares that were negatively impacted by Yellen’s speech include Royal Gold (RGLD), New Gold (NGD), Newmont Mining (NEM), and Goldcorp (GG). These four stocks fell 0.24%, 1.3%, 0.78%, and 0.84%, respectively. Together, the four mining stocks make up about 19.5% of the VanEck Vectors Gold Miners Fund (GDX).


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