Why Investors Have Stopped Pouring Money into Precious Metals
Precious metals and mining-based investments
The much-anticipated hike in the US interest rates has kept a firm hold on the precious metals. In 2015, precious metal prices were also closely tied to the rate hike conundrum. The upheaval of the financial markets that started in 2016 sparked the safe-haven demand for gold and other precious metals. Gold, silver, and platinum have been rising steadily so far this year. These precious metals have risen 16.2%, 9.3%, and 7%, respectively, on a YTD (year-to-date) basis. Palladium, however, has fallen 1.1% YTD. Palladium prices have been on a roller-coaster ride in 2016.
The diminishing safe-haven bids and the increasing likelihood of a rate hike have weighed on the bullions. All four precious metals have slipped during the last 30 trading days. Gold, silver, platinum, and palladium have fallen 3%, 3.6%, 3.1%, and 2.8%, respectively, on a trailing-30-day basis.
The fall of the bullions has also affected precious metal–tracking funds like the iShares Silver Trust (SLV) and the iShares Gold Trust (IAU). These two funds have plunged 2.5% and 2.6%, respectively, on a trailing-30-day bais. The miners that have joined the fall include Eldorado Gold (EGO), Silver Wheaton (SLW), and Gold Fields (GFI). These three companies have fallen 11.1%, 1.5%, and 6.6%, respectively.
Reduced Asian demand
The recent plunge in the bullions has likely fended off investors from the precious metals and precious metal funds. The physical markets are also not offering much support to the bullions. The Asian demand is slow, and India’s gold imports fell 34% in February compared to February 2015. The hopes for a reversal in the import duties may also be keeping investors at bay.
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