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How Global Market Sentiment Is Affecting Gold

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Part 4
How Global Market Sentiment Is Affecting Gold PART 4 OF 4

How Global Market Sentiment Is Affecting Gold

Trump and global sentiment

Precious metal markets saw low trading volumes on May 29 due to the Memorial Day holiday in the US. President Donald Trump’s negotiations with other world leaders at the G7 Summit caused a spike in the haven bids for gold. Trump pledged to fight protectionism but refused to endorse a global accord on climate change. He said he needed more time to think about it.

Global sentiment has been an important factor in deciding the price movement of precious metals. Haven bids and global fears are closely linked. Often investors jump to safer assets during times of rising unrest, which is why gold’s appeal seems to be on the rise.

How Global Market Sentiment Is Affecting Gold

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Gold and volatility

The above chart shows the relative price fluctuations in gold and the Volatility Index (VIXY) (VXZ). The CBOE Volatility Index is a good measure of uncertainty in the economy.

Since the start of 2016, gold and volatility seem to have a strong correlation. However, that may not always be the case, and it is possible that the two could diverge.

The relative price changes in precious metals are also evident in funds like the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV). These two funds have seen YTD gains of 10% and 8.5%, respectively.

The mining shares that can also be impacted by the changes in these metals include New Gold (NGD), Hecla Mining (HL), Royal Gold (RGLD), and IAMGOLD (IAG).

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