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How the Trump Trade Fear Is Moving Precious Metals

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Part 4
How the Trump Trade Fear Is Moving Precious Metals PART 4 OF 8

Market Volatility Got a Boost on Trump Trade Fear

Volatility index

The CBOE Volatility Index (or VIX), which is a barometer of overall risk in the market, ended above 15.0% on Wednesday, May 17, 2017. The renewed fear of what Trump will do with trade is most likely playing the markets. Wednesday saw the highest close since April 13 for VIX. During the past week, VIX closed at 9.7%, which is the lowest close since December 1993.

The overall volatility of the market also has a substantial impact on gold. You can see the CBOE Volatility Index (VXZ) (VIXY) versus gold mapped on the graph below.

It’s expected that gold and volatility may often follow the same track. As unrest in the market rises, the demand for haven assets such as gold and silver also rises. Higher volatility means more demand for haven assets.

Market Volatility Got a Boost on Trump Trade Fear

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Market sentiment

As market unrest rises, so does the volatility index followed by haven assets. Gold closed at $1,258.70 per ounce on Wednesday. Silver and platinum ended the day at $16.90 and $945.60 per ounce, respectively. Palladium closed at $777 per ounce.

Market sentiment also plays considerably on market volatility and thus on precious metals. Mining funds such as the iShares MSCI Global Miners (RING) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) rose 1.9% and 2.5%, respectively, on Wednesday.

Major mining shares such as Newmont Mining (NEM), Primero Mining (PPP), Randgold Resources (GOLD), and Agnico Mining (AEM) rose 1.5%, 1.9%, 2.7%, and 0.75%, respectively, on May 17 as unrest in the markets rose. Combined, these miners make up about 16.0% of the VanEck Vectors Gold Miners ETF (GDX).

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