Gold prices (GLD) (RING) (GDX) traded in a narrow range on March 15, 2017, after the Fed’s rate hike decision. On March 16, 2017, gold is moving in a positive direction. Gold prices usually have a positive reaction when the US Dollar Index weakens.
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Previously, we discussed that the US Dollar Index (UUP) fell nearly 1% on Wednesday after the Fed announced its rate hike decision. The fall in the US Dollar Index could be correlated to the fact that the market (SPY) (QQQ) (IWM) might expect more tightening in the monetary policy or a much more hawkish stance from the Fed. A weaker US dollar is a boon for dollar-denominated assets. It makes them cheaper for buyers of other currencies, while a stronger dollar shows the inverse relationship.
When global turmoil rises, investors tend to turn to assets like gold (GLD) and the Japanese yen (FXY). Investors normally prefer gold during an equity market rout because gold becomes an appealing safe haven amid international turmoil. After the subprime crisis, gold gained ~145% from its September 2008 lows to its highs in July 2011.
In the past few months, we saw that gold prices fell gradually after the US presidential election. Gold prices made a low of $1,129.90 on December 19, 2016. After making the low of $1,129.90, gold prices started to recovery. Gold has been trading at $1,200–$1,250 since January 23, 2017.
To learn more, read David Tepper’s Top Stock Picks and Market Insights.