Global ETFs affected by Russian jet takedown
The repercussions of war are being felt far earlier in the markets, as investors have started pricing in the risks of future uncertainties. But upon the release of news that Turkey shot down a Russian jet, global stock markets fell abruptly. The iShares MSCI Russia Capped ETF (ERUS) as well the S&P 500 ETF (SPY) have been negatively affected by growing concerns over Russia’s presence in the Middle East.
Global market volatility may be on the rise, and the volatility index (VIX) is a reliable indicator. The preferred precious metal, gold, tends to have a relationship with the VIX, as the chart below shows. As volatility may rise, the haven demands on gold may pick up, and an upward surge in gold may be expected.
100-day moving average
Precious metals have been plunging in November. Gold, silver, platinum, and palladium have fallen 7.4%, 9.9%, 15.3%, and 22.1%, respectively, on a 30-day trailing basis. They’re all trading below their 100-day moving average prices. Where gold and silver are 5% and 6% lower, platinum and palladium are 12% and 13% below their 100-day respective moving prices.
The relative strength indicator measures the undervaluation or overvaluation of an asset. For gold, it’s trading close to 29. A figure this small indicates that a reversion in prices may just be around the corner. With global cues of war, a pullback may be expected in prices, but the extent of the rebound remains a question. Sentiment is bearish overall in the market for gold and other precious metals.
The ETFs in the mining sector have also been affected by the fall in gold prices. The Direxion Daily Gold Miners ETF (NUGT) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) have lost 46.9% and 16.0%, respectively.