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How Precious Metals Remained Glued to the Fed

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Wednesday blues

Gold prices fell once again on Wednesday, July 26, 2017. Gold futures for August expiration were 0.22% lower for the day, settling at $1,249.4 per ounce. Silver followed gold and fell 0.5%, closing at $16.5 per ounce.

Platinum fell 0.97% the same day, ending at $919.7 per ounce. Palladium was the only precious metal that stayed above water on Wednesday, closing at $868 an ounce, or 0.69% above its previous day’s close.

Much of the fluctuations among precious metals have been dependent on the Fed’s latest statements regarding the next interest rate hike. It was widely expected for the Fed to keep its monetary policy unchanged. An unchanged policy often buoys gold and other precious metals.

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Non-yield bearers

Gold and the other three precious metals are all dollar-denominated assets in that their prices feel the negative impact of any surge in interest rates. As Treasuries and precious metals are both considered safe havens, a higher rate lures investors into yield-bearing assets and away from precious metals.

The impact of rate changes on precious metals also plays on funds like the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV).

Mining stocks, however, kept rising on Wednesday, despite the drop in the price of precious metals. Mining-based shares Primero Mining (PPP), Yamana Gold (AUY), Coeur Mining (CDE), and Barrick Gold (ABX) rose 1.4%, 5.7%, 4.9%, and 1.3%, respectively. Together, these mining stocks make up ~12.1% of the VanEck Vectors Gold Miners Fund (GDX). Notably, GDX rose 2.6% on July 26.

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