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Global Scenario Gathers Support for Precious Metals Prices

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Jan. 28 2016, Updated 5:16 p.m. ET

Precious metals and volatility

The upheaval in the Chinese markets during the start of the new year and the continued currency devaluation in China have hurt the world markets and sparked the appeal of gold as a haven asset.

The Federal Reserve is also likely acknowledging the current economic slump. It refrained from raising interest rates on January 27, 2016. Both the delay in the rate rise and the economic downturn are beneficial for precious metals. Gold and silver have risen 2.1% and 2.5%, respectively, on a five-day-trailing basis.

[marketrealist-chart id=1006111]

The overall volatility of the market has also risen, attracting investors to haven assets such as gold. Gold-based funds such as the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust ETF (IAU) also rose 2.2% and 2.1%, respectively, during the past five trading days.

The above chart reflects gold investment via the SPDR Gold Shares ETF and volatility via the iPath S&P 500 VIX Short Term Futures ETN (VXX).

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Miners’ performance

A few other gold-based investments, including gold-based equity stocks such as Yamana Gold (AUY), Alacer Gold (ASR.TO), and Coeur Mining (CDE), have risen during the past five trading days as gold and silver have both rallied.

AUY, ASR, and CDE have risen 12.9%, 7.7%, and 12.7%, respectively, on a five-day-trailing basis. However, these companies also have a 30-day trailing loss, as they all suffered losses due to precious metals’ price carnage during the past year. AUY, ASR, and CDE have lost 12.2%, 12.5%, and 17.1%, respectively, on a 30-day-trailing basis.

These three equities together make up 5.4% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

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