Inside the Recent Role of Volatility in Gold
The volatility index may finally stop being stagnant and move upward, now that the fiasco of the GOP’s healthcare bill attempt failed to launch on March 24.
As the GOP healthcare replacement bill failed to launch on March 24, pessimism among investors spread across markets, and most major stock indexes suffered.
Aside from the Trump trauma that gripped markets last week, another specific focus on Friday, March 24, was the Fed.
The DXY index, which measures the dollar against the basket of six major world currencies, tumbled to 99.6 on Friday, March 24.
Trump’s decision to keep the Republican healthcare replacement bill from a vote on March 24 was very close to a litmus test for his pro-growth program.
Precious metal stocks with higher correlations to their respective metals are often more affected by global indicators.
In this part of the series, we’ll analyze how the US and China could resolve their differences and unite towards global growth.
The S&P 500 Energy Select Sector (XOP) (OIH) is trading at the highest PE ratio of ~32x relative to the other sectors based on EPS estimates for 2017.
The economic performance of the overall world market has a considerable impact on precious metals, especially gold and silver.
Precious metals are known to perform better in a volatile atmosphere.
Silver has performed slightly better than gold and platinum on a year-to-date basis.
All four precious metals witnessed a rise in price on Monday, March 20, as the US dollar slipped to its six-week low.
All four precious metals have found room to breathe as looming fears of an interest rate hike have now passed. Gold rose 0.27% on March 17, 2017.
When the interest rate hike took place on March 15, 2017, much of the upside in precious metals had already been priced in by the market.
The bullish bias continued during the trading session on March 15. Gold touched the day’s high of $1,221.2 per ounce.
Market volatility impacts precious metals. Even amid the rising interest rate, if market volatility rises, investors can expect gold to increase.
The buoyancy of precious metals could be challenged even more by future interest rate hikes, as the Fed indicated by its latest hike on March 15.
In times like these, monitoring the implied volatilities of large mining stocks is all the more important.
Before the Fed’s rate hike decision on March 15, gold had retreated for nine days in a row, touching its lowest mark of $1,195 per ounce.
The precious metal market had experienced a slump in the days leading up to the Fed’s decision to hike the interest rate on March 15.