The Weekly Dig - March 17, 2017
by Mick Carew, PhD, mcarew@haywood.com and The Haywood Mining Team
Gold and Canadian Dollar Surge Following FOMC Rate Decision
Highlights:
Following a number of comments from Federal Reserve officials in recent weeks, the benchmark interest rate range was lifted by a quarter of a percentage point on Wednesday to between 0.75% and 1%, with two further rises expected to come this year. While it appeared likely that the raise would occur, encouraging jobs data from the U.S. likely was a large factor, with 235,000 jobs created in February and wages rising by 2.8%. Despite the interest rate rise, the price of gold shot through the US$1,200 per ounce level after briefly falling to as low as US$1,197; the momentum of gold was somewhat counterintuitive to expectations given the typical inverse relationship between U.S. interest rates and the price of gold. Some commentators suggested that several rate rises had been expected in 2017; with the Federal Reserve only indicating 2 further rises for the year, the price of gold rose accordingly. However, it remains to be seen how the price of gold will perform for the remainder of 2017 given the continued positive economic data out of the U.S. Gold equities responded in kind, with the S&P/TSX Global Gold Index hitting 210 before settling at 206.5 on Friday. It was positive gains across the board for both precious and base metals; silver (up 2.0%), platinum (up 2.3%) and palladium (up 3.8%) all followed the gold price to finish the week at US$17.39, US$965 and US$777 per ounce respectively. Base metal prices recovered some of last week’s losses; copper (up 3.4%), nickel (up 3.6%), lead (up 1.0%), and zinc (up 6.2%) all rising to finish at US$2.68, US$4.63, US$1.03 and US$1.30 per pound. After last week’s 10% drop, WTI crude was relatively level with where is began the week, finishing at US$49 per barrel.
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