Will Gold and Equity Walk Hand-in-Hand?
Equity and gold
The rise in the stock market on Monday, July 11, 2016, was an important factor that played on gold. As positive US data came in, there was a wave of hope in Asian share markets, and they enjoyed a relief rally. Markets all over the world take direction from the health of the United States, the world’s largest economy.
The performance of Asian share markets is depicted here by the SPDR S&P Emerging Asia Pacific ETF (GMF). Gold is represented by the SPDR Gold Shares (GLD). During times of turbulence, equities often fall flat since there’s a lack of confidence in the Market and doubt whether industries will perform well.
Gold often rises during global tumult. This was evident at the end of June after the Brexit vote. However, since then, the Market has been rather stable, and gold is losing its appeal, albeit slowly.
Investors are expecting gold to surge again if the Fed delays an interest rate hike. Gold is advantageous when interest rates are lower. Equities may also surge as overall Market sentiment slowly improves. Market speculators are continuing to flock to gold.
Miners are in a fix
Mining shares seem to be in a fix, not knowing whether to follow the trend in the broad equity market or follow precious metals. However, precious metal miners have typically associated with precious metals.
Miners that followed the gains in gold and silver over the past few days include Buenaventura Mining (BVN), Yamana Gold (AUY), and Silver Wheaton (SLW). They rose 5.2%, 7.5%, and 6.5%, respectively, on a five-day trailing basis. Combined, they make up 12.3% of the changes in the VanEck Vectors Gold Miners ETF (GDX).