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How Economic Numbers and Sentiment Are Playing on Gold

PART:
1 2 3 4
Part 4
How Economic Numbers and Sentiment Are Playing on Gold PART 4 OF 4

How Economic Numbers and Sentiment Are Playing on Gold

Economic indicators

Fluctuations in precious metals could take a lot from crucial economic numbers that come out of the United States. On Wednesday, March 1, 2017, the ISM (Institute for Supply Management) manufacturing index, which measures the level of a diffusion index based on surveyed purchasing managers in the manufacturing industry, was at its best level in more than two years. The level was 56, which was higher than the analyst expectation of 55.

A level above 50 indicates industry expansion, while a level below 50 indicates contraction. These positive numbers gave a push to the US dollar. In the long run, the rise of the dollar could be negative for precious metals.

The Beige Book has cooled down a bit. The Beige Book is a collection of anecdotes about the economy, gathered before the central bank showed the spike in business optimism following the US presidential election.

How Economic Numbers and Sentiment Are Playing on Gold

How Economic Numbers and Sentiment Are Playing on Gold

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Volatility and gold

The rise in precious metals over the last few months has been due to insecurity among investors, given the political climate. Gold acts as a buffer to market risk and volatility. Volatility in the market is predicted by the Volatility Index (VIXY) (VXZ).

Many of the changes in precious metals depend on the overall haven demand of the assets. The higher the uncertainty in the markets, the greater the demand for haven assets such as gold (IAU) and silver (SLV).

Mining shares are also impacted by fluctuations in the overall economic environment. Most of the time, miners react in the same direction as precious metals. But over the past week, mining stocks have been falling, despite the rise in gold.

Stocks such as AngloGold Ashanti (AU), Hecla Mining (HL), Kinross Gold (KGC), and Eldorado Gold (EGO) have fallen 5.6%, 12.0%, 6.1%, and 14.4%, respectively, over the past five trading days.

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