Gold futures traded on COMEX rose 1.6% on Wednesday, January 20, 2016, as the global stock markets plummeted. Unrest in the stock markets often pushes gold higher. Fears once agin gripped the markets as China’s Shanghai Composite Index fell 1% and Europe’s Stoxx fell 3.2%. The Dow Jones Industrial Average gave up 565 points during the early trade hours on Wednesday but recovered after that. Investors seem to be in panic mode, as they are moving away from equity investments and jumping into safer investment classes like gold and silver.
The below chart shows the inverse relationship between gold and the equity markets, tracked by the S&P 500 performance, over the past 15 years.
Gold futures closed at $1,106.2 per ounce after hitting the high of $1,109.9 per ounce. The implied volatility on gold also rose to 15.8% from the close at 14% levels seen the day before. Gold prices are still trading below their 100-day moving average price, which has risen to $1,108.1 per ounce.
The stock market slump not only buoyed precious metals but also the mining companies that usually follow gold. Mining stocks like Primero Mining (PPP), New Gold (NGD), and Newmont Mining (NEM) surged 5.9%, 8.3%, and 1.5%, respectively, on Wednesday. These three stocks together make up 8.3% of the VanEck Vectors Gold Miners ETF (GDX). The GDX indicator itself rose 3.1% on the same day but has a five-day-trailing loss of 5.1%. The most famous gold-based ETF, the SPDR Gold Shares (GLD), gained 4% during the past one month and is trading at $105.5 per share.