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Understanding the Mid-October Rebound in Precious Metals

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The rebound of precious metals

Gold rose to a three-week-high level of $1,304.1 per ounce on Friday, October 13, and closed at $1,302.9. Gold futures for November expiration were 0.63% higher that day.

Silver, platinum, and palladium futures were 0.84%, 0.65%, and 1.2% higher, respectively, the same day, and all four precious metals were showing five-day-trailing rises in price. Palladium also showed a 30-day trailing rise, while the other three precious metals show a loss during that time frame.

Meanwhile, the iShares Gold Trust (IAU) and iShares Silver Trust (SLV) have shown five-day rises of 2.5% and  3.5%, respectively.

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Economic outlook

The rise in the metals was most likely due to the recent bearish sentiment toward the US economy, with tax plan gridlock and stalled healthcare reform bills having a negative impact on the US dollar. Remember, any fall in the US dollar is often negative for precious metals as they are all greenback-based assets.

Meanwhile, another interest rate hike in December 2017 is now uncertain as US inflation levels remain subdued, but any increased possibility of a hike is negative for precious metals because they are non-yield bearers. This means that any delay in rate hikes causes precious metals to surge.

The mining shares that increased on Friday, October 13, include Harmony Gold (HMY), Eldorado Gold (EGO), Compania de Minas Buenaventura (BVN), and Sibanye Gold (SBGL).

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