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What’s Keeping a Lid on Precious Metal Prices?

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Precious metals

On Friday, February 9, gold prices saw some sign of revival as equities continued tumbling and haven bids pulled precious metals higher. However, overall, gold, silver, and platinum experienced a down day with falls of 0.17%, 0.36%, and 0.78%, respectively. Palladium had an up-day with a rise of 1.2%. However, in the last one week, all precious metals plummeted. Gold, silver, platinum, and palladium have fallen 1.5%, 3.4%, 3.8%, and 7.8%, respectively, on a five-day trailing basis.

The primary reason behind the slump in these metals is the rise in the US dollar. The DXY Index, which represents the US dollar against a basket of six major world currencies, has risen 1.4% in the past five days. It was up 0.24% on Friday.

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Negative impact

Though the global sell-off could have provided support to the above metals, the dollar’s rise kept their gains in check. The rise in US Treasury rates also could have kept a lid on precious metal prices. The Bank of England said during the last week that it was likely to raise interest rates by more than it previously expected. Its benchmark ten-year Treasury note yield rose close to 2.9% after the Bank of England signaled more aggressiveness in rate hikes. The economic boost across the globe is likely helping the UK.

Precious metals are often known to negatively react to rising interest rates, as this suggests that investors could park money in yield-bearing assets rather than precious metals.

The iShares Gold Trust (IAU) and the iShares Silver Trust (SLV) fell 0.16% and 0.45%, respectively, on Friday. Franco-Nevada (FNV), Coeur Mining (CDE), Cia De Minas Buenaventura (BVN), and AngloGold Ashanti (AU) fell 1.3%, 5.8%, 1.3%, and 3%, respectively.

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