Precious metals-related exchange traded funds are under pressure ahead of the Federal Reserve’s meeting this week, with speculators driving up bond yields and the U.S. dollar.
“Rising yields have supported the US Dollar and, for the second consecutive week, continued to weigh on the precious metals sector,” according to ETF Securities analysts Mike McGlone and Nicholas Brooks.”Accordingly, all metals posted declines, led by a 6.5% fall in palladium.”
The PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP), which acts as an ETF proxy for the U.S. Dollar Index, gained 0.6% last week. [Shocker: Dollar’s Gain, Commodities’ ETFs Pain]
Meanwhile, the ETFS Physical Palladium Shares (NYSEArca: PALL) was down 6.1% over the past week. Additionally, after the outflows, total ETF palladium holdings have dropped 4% since August 25. PALL, though, remains the best performing precious metal ETF, rising 16.7% year-to-date. [Palladium Problems Could Spell Trouble for Precious Metals ETFs]
In comparison, the ETFS Physical Platinum Shares (NYSEArca: PPLT) is down 0.5% year-to-date and the SPDR Gold Shares (NYSEArca: GLD) is up 2.0% so far this year.
“Platinum has been most hurt by the rising US Dollar, exhibiting the highest correlation to the Euro among the precious metals due to the diesel focused European auto market,” ETF Securities added.
The euro has depreciated 6% against the U.S. dollar this year. The CurrencyShares Euro Currency Trust (NYSEArca: FXE) is down 6.1% year-to-date.