How Might Global Uncertainty Affect Gold Investments?



Bolstering gold demands

Gold bullion investments have risen when markets face turmoil, whe real interest rates are low, when faith in fiat currencies is crumbling, and when nations are insolvent. Gold likely appeals as a haven, and that is why investors seek it as a place to stash their cash. Gold has been rising since the FOMC (Federal Open Market Committee) policy setting meeting. Gold futures on COMEX, a commodity division of the New York Mercantile Exchange, had gained 1.97% on September 24 and had increased ~1% on a five- day trailing basis. Gold has seen five out of ten up-trading days as of September 24. Under the current scenario, we see unstable Europen markets as weak, which may further trigger the safe-haven flows for gold.

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Stocks and the dollar gained after second-quarter economic growth data. The GDP was revised upward. GDP is the broadest measure of economic activity and the primary gauge of a country’s economy’s health. The actual figures stood at 3.9%, higher than its forecast of 3.7%. Economists were expecting no change in the number. That contributed to the downdraft in gold prices on September 28 as gold prices stood at $1,127.3 per troy ounce. Below is a chart for the comparative price performance of gold futures and the S&P Index.

Other bullions

Silver futures on Comex also saw gains on September 24, followed by a marginal loss on September 25. Gold was trading in the range of $1,140 to $1,151 per ounce on Friday, September 25. Silver prices followed gold lower, down 0.13% at $15.11 per ounce. Platinum was down 0.5% at $951 per ounce. Platinum and palladium has had a volatile week, as we discussed in our series Platinum Falls and Palladium Rises Due to the Volkswagen Scandal.

Precious metals–backed ETFs are also affected by changes in the prices of gold and silver. Leveraged ETFs Direxion Daily Gold Miners 1 (NUGT) and Direxion Daily Jr. Bull Gold 3X (JNUG) have gained ~4% and 13% on a 30-day trailing basis. Rising gold prices likely back the positive returns in leveraged ETF investments.

Mining companies like GoldCorp (GG), AngloGold Ashanti (AU), and Hecla Mining (HL) have all seen a rise in their share prices. The surge is likely because of the positive returns on the precious metals. These three stocks together account for 13.5% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).


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