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Gold’s Rise and Fall: Where Are Precious Metals Heading?

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Aug. 24 2015, Updated 3:06 p.m. ET

US dollar falling

Amid the rising global crisis, gold has seen more up days in the past week than down days. With a five-day trailing gain of 0.97%, gold surged 0.51% on August 17. Other precious metals silver and platinum gained 0.56% and 0.67%, settling at the price of $15.298 and $1,000.70, respectively.

The Direxion Daily Gold Miners ETF was the biggest gainer among gold ETFs on Monday. It increased by 10.94%. The iShares Gold Trust (IAU) minutely gained 0.09%. The mining companies that were among the top performers during the last week on the VanEck Vectors Gold Miners ETF (GDX) include Alamos Gold (AGI), Iamgold (IAG), and Eldorado Gold (EGO).

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As the expectations on rate hike fade, a delay seems to be in the cards and the US dollar is stumbling. The five-day trailing loss for the USD index is close to 0.5%. With the tentative lift-off prospects, gold investments should be less lucrative. As gold has nothing more than its yellow sheen to offer investors—no storage value additions, interests, et cetera—high yield investments would be preferable. The probable delay in the rate hike would hurt the US dollar and push gold prices upward. With a lower dollar value, gold seems to be cheaper for investors, as gold is dollar-denominated. So a lower US Dollar means lower gold prices. Investors from other countries have to spend less of their home currencies to buy the US dollar.

Volatility measures

The current implied volatility for gold is close to $14.74. It fell from close to ~$17 during the past month. The reduced implied volatility represents stabilizing gold prices. Also, the implied volatility for silver has fallen. Platinum prices, on the other hand, have seen a surge in volatility. Platinum futures prices on Comex for October expiry are close to $1,000 per ounce. They rose 0.46% on a five-day trailing basis and 0.67% on August 17.

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