Strong Manufacturing Data Pressured Precious Metals
Economic data positive
Precious metals dropped on Tuesday, March 1, 2016, as gold and silver fell by 0.29% and 1.1%, respectively. The primary reason behind this fall was the decline in demand for the safe-haven metals due to the bounceback in the equity markets.
The economic data that came out on Tuesday also substantially helped the stock markets and posed a threat to precious metals. The ISM Manufacturing PMI (purchasing managers’ index) was positive at 49.5, higher than the forecasted 48.5. This data has been negative for the past three months, so a rebound in this figure helped the overall market sentiment.
Construction spending and manufacturing prices were also positive. The economy got a boost from the construction spending numbers, which touched a high of more than eight years.
Mining returns
Oil prices jumped another 1.9%, further helping gold and acting as a gauge for scaling equity markets. The mining industry has been closely following precious metals since the beginning of 2016 and continues to do so.
The Global X Silver Miners ETF (SIL) and the Market Vectors Gold Miners ETF (GDX) fell by 3.9% and 4.2%, respectively, on Tuesday. The mining stocks that also saw a down day. Cia De Minas Buenaventura (BVN), Agnico-Eagle Mines (AEM), and Gold Fields (GFI) dropped by 3.1%, 5%, and 8.4%, respectively. These three companies together make up 12.1% of the Market Vectors Gold Miners ETF (GDX) portfolio.
Investors are keenly watching the economic data for now, as it could provide some clues to the Federal Reserve’s decision on whether it should hike interest rates any further. Interest rates and gold prices have a close inverse relationship.
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