Precious metals rebounded
After a two-day losing streak, precious metals bounced back again. Gold futures for April delivery surged 0.26% and closed at $1,211.40 per ounce on Wednesday, February 17, 2016. It stayed above the previous day’s low of $1,191.50 per ounce and only touched the minimum mark of $1,196.20 per ounce.
The implied volatility in gold price, which measures the expected volatility of a stock over the life of the option, stood at 21% on Wednesday. The volatility has subsided from recent highs. The spike in volatility was due to the global economic jitters that gripped the markets. Gold prices are currently trading at a premium of 8.6% from its 100-day moving average price of $1,115 per ounce.
Gold prices may be on a fast track for reversal, as gold prices are lingering way above the 100-day moving average. The RSI (relative strength index) for gold is around 68.3. A figure above 70 indicates a possible overvaluation of the asset.
Other precious metals and ETFs
Silver, platinum, and palladium rose 0.28%, 1.3%, and 1.2%, respectively, on Wednesday, February 17. The volatility of these three metals also took a drop as prices stabilized.
The ups and downs in precious metals have a significant impact on investments in ETFs. ETFs are investment vehicles investors opt for when they’re looking for diversification of risk.
Mining-based ETFs such as the VanEck Vectors Gold Miners ETF (GDX) invest in major mining-based companies such as Yamana Gold (AUY), Silver Wheaton (SLW), and Coeur Mining (CDE). These three companies also rose on Wednesday following the gains in precious metals. The stocks surged 3.3%, 2.2%, and 5%, respectively, that day. GDX also rose 3.5%. The leveraged mining-based Direxion Daily Gold Miners Bull 3X ETF (NUGT) rose 9.4%.