Unrest in the Market Due to North Korea: The Impact on Gold
Tensions over North Korea
All four precious metals except platinum had an up day on Friday, September 22, 2017, as tensions in the North Korean peninsula got stronger. US President Donald Trump ordered new sanctions against North Korea last week after North Korean leader Kim Jong-Un vowed to persist with his nuclear and missile programs.
On Friday, North Korea said it might test a hydrogen bomb in the Pacific Ocean after Trump’s sharp comments to destroy their country. These factors can raise market risk and are often helpful for haven assets such as gold and silver.
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Gold and VIX
A comparative study of gold (GLD) movements and overall market uncertainty measured by the Volatility Index (or VIX) (VIXY) helps us understand their relationship. They often move hand-in-hand when market unrest rises.
The most important driver for gold lately has been the overall market sentiment.
Although gold and volatility are expected to walk hand-in-hand most of the time, they can also deviate, as you can see in the chart above. The FOMC (Federal Open Market Committee) meeting also has a significant effect on gold’s safe-haven appeal.
Mining shares can lose volatility when precious metals are in a conundrum. Mining companies such as Alacer Gold (ASR), Barrick Gold (ABX), Kinross Gold (KGC), and Iamgold (IAG) are among the companies that track gold’s price changes.