How Gold Rode to the Rescue amid the Global Fallout



Highest intraday gain since 2009

On Thursday, February 11, 2016, gold futures for April delivery surged almost 4.5% to yield the highest single-day gain since 2009. It touched the day’s high of $1,263.90 per ounce and closed a little lower at $1,247.80 per ounce. This movement implied volatility in gold, which measures the expected volatility of a stock over the life of the option, rose to 24.6% on Thursday. The sudden price surge saw gold trading at nearly a 10% premium from its 20-day moving average price of $1,133.

The rise in gold was also followed by an increase in silver and platinum. Respectively, these two precious metals rose by 3.6% and 3.1%, and they closed at approximately $15.80 and $963.20 per ounce.

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ETFs and miners rose

The dramatic rise in precious metals also caused a rally in exchange-traded funds like the SPDR Gold Shares ETF (GLD) and the iShares Silver Trust ETF (SLV). These two indicators rose 4% and 2.8%, respectively, on Wednesday, February 10, 2016.

Mining-based companies also jumped due the gains in gold and silver. Eldorado Gold Corp. (EGO), Coeur Mining Inc. (CDE), and Kinross Gold Corp. (KGC) rose by a healthy 13.5%, 12.8%, and 12.8%, respectively. These three companies contributed 7.7% to the VanEck Vectors Gold Miners ETF (GDX) portfolio. GDX also increased by 7.1% and closed at $18.40 per share.

The primary reason for the dramatic rise in these precious metals was their safe-haven appeal, which received a boost as the global markets slumped. Investors shunned risk and flocked to precious metals. This risk-off sentiment flowed through the markets as Janet Yellen, Federal Reserve chair, testified to Congress on February 10, 2016.

Please read the second part of this series for an update on the impact of Yellen’s testimony on precious metals.


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