Precious Metals Suffer From High Interest Rates and Strong Greenback

It was a tough week for precious metals ETFs with dips in gold, silver, and platinum.

Gold slipped by 1.22%, while silver, known for its greater volatility, took a nosedive, down 6.64%. Silver-focused ETFs plunged accordingly, with the WisdomTree Physical Silver ETC and the iShares Physical Silver ETC suffering losses of 5.945% and 5.940% respectively. However, a growing number of analysts see silver as one of the winners in the transition to a green economy, due to its use in photovoltaics and electric vehicles. With solar panel installations significantly increasing compared to last year and the electric vehicle market accelerating, the silver market is indeed expected to be in deficit for the second consecutive year in 2023.

Gold miners ETFs continue to struggle under persistent pressure due to rising costs and declining output, trends we've extensively discussed before. Platinum-based ETFs followed suit with a 6.69% decline for the week, highlighting the weakness observed across the precious metals sector. Yet platinum benefits from a recovery in the automotive sector. Furthermore, some speculators have invested in platinum as a hedge against their sales on palladium, considering that the former has more potential than the latter, given its more significant role in the energy transition arena. 

Three factors are responsible for this significant shift towards a bearish sentiment on precious metals - rising risk-free rates, a stronger US dollar, and technical analysis suggesting vulnerability near their respective resistance levels. 

The greenback demonstrated its strength throughout the week. The dollar index gained 0.89%, reaching its highest level in six months, above 105, while the 3-month Treasury bill rate is at 5.46%. Gold's resistance levels are closely aligned with current prices at around $1,925 per ounce. This delicate balance could easily tip into bearish territory if further negative factors come into play. Market observers are also keeping an eye on the Federal Reserve's policy direction as a potential concern for the gold market. Jerome Powell has left the door open for the possibility of an additional rate hike before the end of the year as part of the Fed's proactive monetary normalization efforts.

Group Data: Precious Metals, Gold, Silver

Funds Specific Data: PHAG, ISLN, PHPT, IAUP, GDX