What Led to the Slump of Precious Metals on October 2?



Monday slump

Gold prices slipped for yet another day on Monday, October 2, 2017, as gold saw its lowest close in the last two months. Gold futures for November expiration were 0.67% lower than the previous trading days and closed at $1,274.10 per ounce. 

Silver followed gold and fell 0.13% to end at $16.70 per ounce. Palladium was the biggest loser among the precious metals, falling 2.7% to end at $912.70 per ounce. Platinum was marginally higher for the day, as it increased 0.12% and ended at $912.00 per ounce. Platinum and palladium continue to trade at parity.

The fall in precious metals was most likely triggered by the rise of the US dollar (UUP). The US dollar, depicted by the DXY Currency Index (or DXY), was 0.52% higher for the day.

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Inverse relationship

As the chart above shows, the US dollar is the most crucial element leading to the decline in gold and other precious metals over the past one-month period. DXY has increased 0.80% during the last 30 trading days. 

Gold, silver, platinum, and palladium have seen massive falls of 4.1%, 6.5%, 9.8%, and 6.8%, respectively, during the same timeframe. The inverse relationship seems to be visible from the above figures.

When the dollar surges, investors from other countries find it difficult to invest in the higher-priced dollar. As a result, demand for dollar-based assets could diminish. Similarly, a fall in the dollar could support buying trends for dollar-based assets.

Mining companies witnessed a mixed performance on Monday. Alamos Gold (AGI) and B2Gold (BTG) dropped 1.3% and 1.1%, respectively, while AuRico Gold (AUQ) and Coeur Mining (CDE) rose 3.6% and 2.3%, respectively. 

These miners contribute almost 3.9% to the VanEck Vectors Gold Miners ETF (GDX), which rose 0.39% on October 2, 2017.


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