How the Precious Metals Have Reacted to a Possible Rate Hike
Gold rises on weaker US dollar
Gold prices rose 0.35% on Friday, December 11, 2015, on the NYMEX commodity exchange. Gold rose $3.7 to settle at $1,075.7 per ounce. The weakness of the US dollar against the euro and yen most likely boosted the dollar-denominated commodity and led to the price surge. The US Dollar Index (DXY) fell 0.38% on Friday. DXY prices the US dollar against a basket of six major world currencies including the euro, pound sterling, Swiss franc, yen, Canadian dollar, and Swedish krona. In the wake of the plunging greenback, assets priced in dollars should rise as they become more lucrative for buyers in other parts of the world.
Gold futures have been dumped aggressively in anticipation of a possible rise in interest rates. Investors most likely believe that rising rates affect the appeal of non-interest-bearing gold as well as other precious metals. Investors are pricing the chance of a rate liftoff this week as high as 81%, which is significantly higher than the 68% odds seen about a month ago.
Miners’ mixed performance
The precious metals mining industry’s performance over the past week has been negative. The Global X Silver Miners ETF (SIL) and the Direxion Daily Gold Miners ETF (NUGT) have fallen 6.5% and 9.5%, respectively. Mining companies have had a mixed performance over the past week. Those that have performed the worst include Yaman Gold (AUY), Alacer Gold Corporation (ASR), and Iamgold Corporation (IAG). These three companies together make up 5.8% of the Market Vectors Gold Miners ETF (GDX), which fell about 3.1% last week.
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