Precious metals miner sector-related exchange traded funds stood out on Thursday as gold and silver prices gained on the weakening U.S. dollar.
Among the best performing non-leveraged ETFs of Thursday, the ETFMG Junior Silver Miners ETF (NYSEArca: SILJ) advanced 8.2%, VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ) increased 6.2%, Global X Silvers Miners ETF (NYSEArca: SIL) rose 7.0%, and VanEck Gold Miners ETF (NYSEArca: GDX) gained 4.4%.
Meanwhile, the SPDR Gold Shares (NYSEArca: GLD) was 1.3% higher and the iShares Silver Trust (SLV) was up 2.2% as Comex gold futures pushed 1.3% higher to $1,873.04 per ounce and Comex silver futures increased 2.0% to $22.04 per ounce.
Precious metals have been strengthening as yields U.S. Treasuries dipped, which bolstered the appeal of zero-yielding hard assets, and a weaker U.S. dollar made USD-denominated gold and silver more appealing to the international crowd, Reuters reported.
“A hawkish Fed (U.S. Federal Reserve), higher real rates, and what still remain anchored medium-term inflation expectations have weighed on gold price momentum amid a relatively robust dollar backdrop,” Citi Research said in a note.
Precious metals like gold bullion are considered a safe haven asset during periods of political and economic uncertainty. However, the rising short-term U.S. interest rates have increased the opportunity cost of holding gold, which offers no interest payments.
“It also seems likely some geopolitical risk premium has eroded as the market absorbed the Russia/Ukraine conflict. On the other hand, elevated asset market volatility, a potential return of the central bank gold bid, and ‘stagflation’ tail hedges have likely buttressed $1,800 support,” the Citi analysts added.
Meanwhile, GoldSilver Central MD Brian Lan argued that gold could remain range bound in the absence of major news updates. Investors are waiting to see how gold reacts to China’s reopening from COVID-19 lockdowns. Lan warned that while there could be pent-up demand on the physical side, large institutions holding gold may liquidate to raise funds.
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