A Prevailing Risk-Off Sentiment Pushed Gold and Silver Higher



Risk-aversion emerges

Since the start of the new year, the financial markets have been victimized by turmoil that was likely initiated by the Chinese markets. The US stock market’s stumble triggered a risk-averse sentiment among many investors, pushing them back into safe-haven assets like gold and silver.

Gold had been on a continuous winning streak, and it saw four straight sessions of gains from $1,073.60 on January 14 to $1,106.20 per ounce on January 20. These gains stemmed from the rattled equity markets. The chart below shows a three-day pivot chart for gold that shows its gradually rising prices.

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DXY and gold

Risk-averse investors may also flock to the US dollar. This is measured by the US Dollar Index (DXY), which prices the trade-weighed dollar aginst a basket of six major world currencies: the Swiss franc, the euro, Japanese yen, Swedish krona, British pound, and the Canadian dollar. DXY gained 0.29% on Thursday, January 21, weighing down dollar-denominated assets like gold and silver.

Representative of the mining-based stocks, Kinross Gold Corp. (KGC), Eldorado Gold Corp. (EGO), and Alacer Gold Inc. (ASR-TO) gained on Thursday. These three stocks rose 2%, 1.4%, and 6.7%, respectively, on Thursday. However, the past month has been a crash-filled one for these three mining companies as they saw losses of 20%, 30.7%, and 10.1%, respectively, on a 30-day trailing basis. These three companies together make up 7.9% of the VanEck Vectors Gold Miners ETF (GDX).

The SPDR S&P Metals and Mining ETF (XME) and the Global X Silver Miners ETF (SIL) gained 2.2% and 1.1%, respectively, on Thursday, January 21.


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