Gold Prices Rally Despite Fed Pitching Higher Rates
Gold prices rallied more than one percent on Thursday, November 19, after falling to six-year lows.
After the Federal Reserve released the Federal Open Market Committee (FOMC) meeting minutes, it was anticipated that the yellow precious metal could fall further. There were instances that suggested interest rates could rise in December. Instead, in early morning trading on Friday, November 20, gold prices continue to move to the upside.
Thanks to Higher Gold Prices, Gold Miners See Solid Gains
Due to higher gold prices, the precious metal mining sector got a boost. Market Vectors Gold Miners ETF (NYSEArca:GDX), which tracks the performance of major gold mining stocks, soared 3.6%, as gold prices increased by one percent.
Looking at the performance of a few senior gold producers, Barrick Gold Corporation (NYSE:ABX), one of the biggest gold miners in the world, rose nearly 4.30% on Thursday, while miners like Goldcorp Inc. (NYSE:GG) increased 2.36%, Newmont Mining Corporation (NYSE:NEM) jumped 2.38%, and Yamana Gold Inc. (NYSE:AUY) was up 0.53%.
Likewise, Market Vectors Junior Gold Miners ETF (NYSEArca:GDXJ), which tracks the performance of junior mining companies, rose 2.8%. However, year-to-date, GDXJ is still down more than 23%.
Notable gains were reported in leveraged exchange-traded funds (ETFs), with the Direxion Daily Gold Miners Index Bull 3X Shares (NYSEArca:NUGT) ETF rising 10.5%.
Going into the next week, there are a few data sets that investors could be watching to weigh the direction in which gold prices could move.
On Monday, November 23, German and French manufacturing and services sectors’ activity data will be released. This could have implications on what the European Central Bank (ECB) does regarding its monetary policy. The ECB is involved in asset purchases and there’s noise it could increase its purchasing pace. News regarding major central banks easing their monetary policies causes gold prices to move higher. The ECB’s action following the November 23 report could influence the direction in which gold prices travel.
Additionally, on Tuesday, November 24, U.S. gross domestic product (GDP) numbers will be released. According to the Federal Reserve Bank of Atlanta’s GDP Now, a GDP forecasting tool that follows a similar measure to the government figures, third-quarter GDP is expected to come in at 2.3%. (Source: “GDP Now,” Federal Reserve Bank of Atlanta, last accessed November 20, 2015.) Improving GDP figures could hurt gold prices.
Over the past few years, investors have been selling gold because it is perceived as a safe haven and may not be needed when economic conditions are better. For this reason, the release of new economic data tends to influence gold prices and could help investors devise a wise investment strategy in the precious metal.