Gold Fell Due to Economic Numbers and the US Dollar



Inverse relation

Gold fell on November 7 after witnessing a rise of almost 1% the previous trading day. Gold futures for December delivery fell 0.45% on Tuesday—likely due to profit-booking by investors after seeing the gains on Monday. Silver, platinum, and palladium also fell on Tuesday. They fell 1.7%, 1%, and 0.1%, respectively, on Tuesday.

The US dollar, which influenced the move in precious metals in the past month, rose 0.16% on Tuesday. The rise in the dollar is often detrimental to precious metals because they’re dollar-denominated assets.

The following chart shows the inverse relationship between gold and the US dollar (UUP) during the past month. A rise in the dollar is negative for gold (GLD), while a fall in the dollar usually helps gold.

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Economic outlook

The economic numbers that came out last week also had an impact on precious metals. The non-farm employment change was among the numbers that could influence the economic outlook. It measures the change in the number of employed people during the previous month, excluding the farming industry. The non-farm employment change was 261,000 on November 3—much lower than analysts’ expectation of 312,000.

The unemployment rate, which is the percentage of the total workforce that’s unemployed and actively seeking employment during the previous month, was lower than analysts’ forecast. It stood at 4.1%—lower than the expectation of 4.2%. When the economic numbers are better, the economic forecast is brighter and the demand for safe-haven assets might be lower.

The mining shares that had a bad week included Barrick Gold (ABX), Randgold Resources (GOLD), Hecla Mining (HL), and Eldorado Gold (EGO). They fell 3.2%, 7.3%, 2.8%, and 2.4%, respectively, on a five-day trailing basis.


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