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Precious Metal Movements: A September Review

PART:
1 2 3 4 5 6
Part 2
Precious Metal Movements: A September Review PART 2 OF 6

How Gold Reacts to the Stock Market

Equities rebound

Aside from the impacts of the US dollar, the US Federal Reserve, and global tensions, we also have to discuss stock market performances in order to understand movements in gold. Equities and safe-havens like gold are historically known to move in opposite directions because gold is often seen as a hedge against overall market risk.

On Friday, September 29, global stock markets rose as investors digested the positive data that came out of the US on September 28. Also, the US tax reform plan proposed by President Donald Trump may have given some buoyancy to stocks, though the White House has struggled to defend its new tax plan against criticism.

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Stocks and gold

The above chart shows the price changes in gold as represented by the SPDR Gold Shares (GLD) and US equities as represented by the SPDR S&P 500 ETF (SPY).

Notably, 3Q17 likely took a hit due to the Hurricanes Harvey and Irma, but investors are still expecting the country to grow at a faster pace than previously expected.

Although precious metal mining companies are inevitably part of the equity section of the market, they rely more on precious metals than on stock market sentiment. A fall in precious metals pulls these mining stocks down, while a rise in metals floats the stocks.

The mining stocks that took a hit on Friday despite the buoyancy of equity markets include Royal Gold (RGLD), B2Gold (BTG), Agnico-Eagle Mines (AEM), and Randgold Resources (GOLD).

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