All four precious metals have seen downward price movements over the past five trailing days. Gold, silver, platinum, and palladium have fallen 1.5%, 3.7%, 4.1%, and 0.83%, respectively. During the same timeframe, we’ve seen the US dollar and the DXY currency index rise 0.48%. The recent rise in the US dollar has been due to the tax bill that passed over the weekend. The US dollar got a boost from the tax cut, which could give some relief to businesses.
The markets are filled with optimism surrounding the new tax plan, which also reflected in the dollar. The equity markets—especially technology stocks—also rebounded.
The rise in the dollar is negative for precious metals because they’re dollar-denominated assets, which fall when the dollar rises. Similarly, a fall of the dollar offers more breathing room for gold and silver.
The above chart shows the inverse relationship between gold and the US dollar (UUP) over the past month.
Another important element that could lead to lower precious metal prices and the rise of the US dollar is the interest rate hike, which seems to be quite certain. All investor eyes will likely be on the economic numbers coming up and the Fed’s decision next week.
Gold closed at $1,264.3 per ounce on Wednesday, slightly higher than the previous day, while silver ended at $15.9 per ounce.