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Precious metals plunge following biggest US Fed rate hike since 1994

12:00, 17 June 2022

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In this article:
  • Palladium
    Palladium
    2337.63 USD
    96.06 +4.340%
  • Platinum
    Platinum
    937.85 USD
    33.6 +3.750%
  • Silver
    Silver
    21.060 USD
    0.343 +1.660%
  • Gold
    Gold
    1725.40 USD
    25.94 +1.530%

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Bank reserves of gold and silver bars are arranged in rows
Precious metals gold, silver and platinum were all down following the US Federal Reserve raising interest rates by 75 basis points – Photo: Shutterstock

Precious metals plunged on Friday morning, ending the week on a gloomy note, with gold, silver and platinum all down, pressured by a stronger US dollar (DXY) and rising US Treasury yields. However, palladium was still up. 

According to Piero Cingari, analyst at Capital.com, “Over the past month, precious metals have drifted sideways in a backdrop of contained volatility, with gold trading within a narrow range of $1,800 to $1,880 and silver between $20.9 and $22.5. Relatively speaking, the resilience of precious metals is remarkable, especially when compared to the volatility of the stock and bond markets.”

Cingari added: “The gold-to-S&P 500 index ratio, which gauges the yellow metal’s relative strength against the stock index of the 500 most capitalised companies in the United States, is on an upward trend and has just hit January 2021 highs.

“Investors are bracing for an economic stagflationary period characterised by poor growth and excessive inflation. At its latest meeting, the Federal Reserve reduced its 2022 growth forecast to 1.7 percent (from 2.8 percent in March) while raising inflation to 5.2 percent (from 4.3 percent in March).”

The gold to S&P (US500) ratio is on an upward trend 

The gold to S&P 500 ratio chart showing an upward trendThe gold to S&P 500 ratio has just hit January 2021 highs – Credit: TradingView

In London morning trading, spot gold dipped 0.6% to $1,846 per troy ounce, set for a weekly decline of about 1.3%, as the US Federal Reserve hiked interest rates by 0.75% this week.

Silver fell 0.2% to $21.8 per troy ounce, bottoming out below the psychologically important $22 per troy ounce level and approaching a near two-year low.

US 10-year Treasury yields climbed to 3.2%, still holding steady above the critical 3% level.

Platinum edged down 0.8% to $943 per troy ounce, hovering near a six-week low and trading almost 20% down from the highs seen earlier in March.

Palladium inched up 0.2% to $1,882 per troy ounce, but still lingered uncomfortably close to a near five-month low, following continuing disappointing demand from the Chinese auto manufacturing sector for auto catalysts.

Copper lost 0.4% to $4.1 per pound, heading towards an almost 10-month low, following increased investor concerns of global economic slowdown.

Aluminum fell 0.2% to $2500 per tonne, around a one-year low, following the industrial metal approaching oversold levels.

Gold

1,725.40 Price
+1.530% 1D Chg, %
Long position overnight fee -0.0156%
Short position overnight fee 0.0055%
Overnight fee time 21:00 (UTC)
Spread 0.18

Silver

21.06 Price
+1.660% 1D Chg, %
Long position overnight fee -0.0115%
Short position overnight fee 0.0026%
Overnight fee time 21:00 (UTC)
Spread 0.020

Oil - Brent

91.32 Price
+3.530% 1D Chg, %
Long position overnight fee 0.0516%
Short position overnight fee -0.0781%
Overnight fee time 21:00 (UTC)
Spread 0.04

Oil - Crude

85.82 Price
+3.610% 1D Chg, %
Long position overnight fee 0.0235%
Short position overnight fee -0.0429%
Overnight fee time 21:00 (UTC)
Spread 0.03

Iron ore retreated 0.8% to $131 per tonne, falling to around a three-week low, following renewed COVID-19 lockdowns in industrial parts of Shanghai.

 

Top things to know about metals today

Gold: Kinross Gold (KGC) has recently sold its Russian assets to Highland Gold Mining, for half the previously agreed price.

Iron ore: China has recently revealed that in order to combat Australia’s hold on the iron ore market, it will be setting up a centralized iron ore buyer.

Copper: Copper has recently sunk to a 10-month low following recession fears.

Platinum: PwC has recently suggested that miners try to use the profits they reaped from 2021, to bolster the future of critical metals, such as platinum.

What is your sentiment on Palladium?

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Top things to know about mining stocks today

Glencore (GLEN)’s trading division has recently reported a surge in earnings.

Rio Tinto (RIOgb) is currently conducting investigations following an employee at the Kitimat site getting injured and being airlifted in a crucial condition.

BHP (BHP) has just announced that it plans to wrap up its thermal coal following a lack of buyers.

Antofagasta (ANTO) has recently revealed that it expects its full-year guidance to be much lower than expected.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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