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The Silver Market: Fundamentals, Spreads, and More

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Part 3
The Silver Market: Fundamentals, Spreads, and More PART 3 OF 6

How Silver Has Reacted to Market Volatility

Market volatility

World market volatility is one of the most significant contributors to the variations seen in precious metals, including silver. Silver is also sometimes closely associated with equity markets, as it used as an industrial metal. Although the volatility index was stagnant early this year, it moved upward after the failure of President Trump’s healthcare bill.

 
 How Silver Has Reacted to Market Volatility

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The CBOE Volatility Index (or VIX) (VIXY) (VXZ) has been trading close to 10.5% over the past few days. The chart above compares the performance of silver and the volatility index.

Silver, VIX, and risk appetite

Increased unrest in markets boosts safe-haven demand, and as a result, precious metals perform better. Precious metals often perform well amid monetary expansion, that is, if interest rates are falling. However, investors have been waiting for a rate hike from the Fed, which could impact non-yield bearers such as gold and silver.

Market sentiment and global risk appetite are among the most important drivers of precious metals. Market volatility often boosts gold and silver due to their safe-haven appeal.

The Global X Silver Miners ETF (SIL) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) can be impacted substantially by market volatility. These two funds have risen 9.4% and 9.2%, respectively, during the past week. Miners that have recovered include Agnico Eagle Mines (AEM), Randgold Resources (GOLD), Kinross Gold (KGC), and Franco-Nevada (FNV).

 

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