What's Driving Gold: The Fed, Brexit, or Market Sentiment?

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What's Driving Gold: The Fed, Brexit, or Market Sentiment? PART 1 OF 5

Why Gold and Silver Posted Another Gain

Gold rallies

Fear of an interest rate hike seems to have loosened its grip on the precious metals, as they have been surging over the past couple of days. Gold futures for August expiration rose 0.83% and saw their highest close since mid-May to end at $1,272.70 per ounce on Thursday, June 9, 2016. This is almost $70 above its low of $1,200 reached during the end of May. Alongside the gains in gold, silver rose about 1.7% to close at $17.30 per ounce on Thursday.

Why Gold and Silver Posted Another Gain

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The call implied volatility for gold increased on Thursday to 18.3%, which is the highest level over the past month. Gold is comparatively less volatile than the other three precious metals. The call implied volatility for silver on Thursday remained at 27.9%. The call implied volatility measures the changes in the price of the call option written on an asset with respect to the variations in the asset value itself.

Other precious metals

Yesterday was the third straight day of gains for gold and silver. Although gold and silver rose on Thursday, platinum and palladium fell. Platinum and palladium futures for July and September expiration fell 0.81% and 0.1%, respectively, on Thursday.

Funds and miners gain

Most of the precious metal–based funds rose on Thursday due to the gains in gold and silver. The funds that rose the most include the leveraged Direxion Daily Gold Miners Index Bull 3x Shares ETF (NUGT) and the Direxion Daily Junior Gold Miners Index 3x Shares ETF (JNUG). These two funds jumped 4.5% and 6%, respectively, due to the positive sentiment in gold.

The miners that rose on the day include Silver Wheaton (SLW), Primero Mining (PPP), and Franco-Nevada (FNV). These three funds rose 0.3%, 0.53%, and 1.8%, respectively, on Thursday. Together, these three miners make up 10.4% of the VanEck Vectors Gold Miners ETF (GDX).

In the next part of this series, we’ll look at how Brexit could affect gold.


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