Dollar Rally Causes Silver Value to Drop

Cassie Bastien

5/31/2017 9:55:23 AM

Daily Gold & Silver Market Report – 05/31/2017

The U.S. dollar has regained strength, causing Silver prices to drop again. However, the gray metal held its ground and investors hope it will even out with pressure from a possibility of higher interest rates. Economic Calendar Reporter Sam Bourgi said the dollar has “regained its footing over the past week after a series of heavy losses ... [benefiting] from geopolitical risks in the United Kingdom and Eurozone, which has weakened their respective currencies.” Although core inflation has slightly weakened, Bourgi explains it has not weakened “enough to deter the Federal Reserve to scale back plans to normalize monetary policy.” The end of the week sees a flurry of data, with the ADP Research Institute releasing private-sector payrolls for May on Thursday followed on Friday by the Labor Department issuing its non-farm payrolls report, “which provides a more complete picture of the jobs market.”

• Silver’s retreat was preceded by Gold, which fell 0.5 percent Tuesday (EconomicCalendar.com).

Fed Rate Hike Looms, Eases the Value of Gold

Reuters reporters Devika Krishna Kumar and Zandi Shabalala said, “Gold prices eased after hitting a one-month high on Tuesday as economic data from the United States showed increased signs that the Federal Reserve would raise interest rates” in June. However, investors remain anxious over “next week's election in Britain, as well as the prospect of early elections in Italy and worries over Greek debt, which analysts said supported Gold and dented stocks.” Prior to this decline, the yellow metal hit a one-month high on a risk-averse mood in global markets along with the Japanese yen and U.S. Treasuries. Standard Chartered analysts said, “Our economists continue to expect a 25 (basis points) Federal Reserve hike in June while the market is pricing in an 84 percent probability of such a hike.” Forex.com Market Analyst Fawad Razaqzada said, “I expect the dollar to continue to strengthen this week until Friday's jobs data release, therefore I think Gold is going to go down from here.” The question lies in what happens after all these reports are released.

Low Oil Prices Help Precious Metals Prices

According to Meera Shawn with Market Realist, Precious Metal prices rose May 26 due to a drop in oil prices, with Gold rising 0.93 percent, Silver up 0.44 percent, Platinum up a whopping 1.1 percent and Palladium up 2.4 percent. As Shawn explains, “the [Organization of the Petroleum Exporting Countries] members and non-members led by Russia decided on Thursday, May 25, to extend the previous cuts in oil output by nine months to March 2018.” As oil-producing companies watched revenues suffer over the past year, the output cuts have negatively impacted oil prices. In addition to oil prices, investors are eyeing the Federal Reserve as to the possibility of further interest rate hikes, which impact the Precious Metals market. Shawn noted, “the Precious Metal mining funds that followed the direction of Precious Metals on Friday, May 26, include the Global X Silver Miners Fund and the Sprott Gold Miners, which rose 0.73 percent and 0.84 percent that day.”

At 10:55 a.m. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,268.60 Up $2.90
• Silver, $17.44 Down $0.10
• Platinum, $947.90 Up $4.30
• Palladium, $821.10 Up $12.40

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