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The Dollar Gains, Precious Metals Decline

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Feb. 23 2018, Updated 5:22 p.m. ET

Weekly gains

Gold and silver spot prices fell 0.40% and 1.2%, respectively, on Friday, February 16. Gold futures for February expiration were trading at $1,353.2 per ounce. Silver futures for February expiration were trading at $16.7 per ounce. Platinum and palladium spot scaled 0.31% and 2.6%, respectively. Platinum and palladium futures for February expiration were trading at $1,009.3 and $1,037.7 per ounce, respectively.

Gold was on track for its biggest weekly gain in close to two years. All four precious metals increased over those past five trading days. Gold, silver, platinum, and palladium increased 3.1%, 3.6%, 5.3%, and 7.3%, respectively.

The decline in the US dollar mostly led the rise in these four precious metals. The US dollar, depicted by the DXY Currency Index, was down 1.5%.

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Inverse relationship

The US dollar (UUP) hit a three-year low on Friday, February 16, on speculation that the government would pursue a weak dollar strategy. The weakness of the US dollar lures investors from other countries to invest in dollar-denominated assets like gold and other precious metals. So these metals saw a considerable rise in prices. The SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) rose 2.6% and 2.2%, respectively, on a five-day trailing basis.

The above chart depicts the inverse relationship between the two over the past month. The correlation was -0.57. 

Among the mining stocks that also rose last week are Cia De Minas Buenaventura (BVN), Franco-Nevada (FNV), Gold Fields (GFI), and Newmont Mining (NEM). They were up 8.9%, 6.7%, 7.1%, and 6.4%, respectively.

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