Risk-On Mode Loses Ground: What About Precious Metals?



Best performers

The risk-on mode in the overall markets has pulled down the equity markets and given a lift to the price of precious metals. They’ve been the best performers among commodities traded on the exchanges.

According to the S&P GSCI (Goldman Sachs Commodity Exchange), gold and silver are the top two among the 24 commodities that form the index. The index includes wheat, corn, Brent oil, copper, and others. The top two gainers, gold and silver, have surged about 14% and 11%, respectively, since the start of 2016.

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The rise in gold has pumped up ETFs that take their price directions from gold and silver. The SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) have both risen 16.7% since the beginning of 2016. In the graph below, you can see the price performance of the SPDR Gold Shares since the start of 2016.

[marketrealist-chart id=1056458]

Miners buoyed

The fall in the stock market raises precious metals, but a rebound in equities pushes them down. Losses from the reversal on Thursday, February 11, 2016, happened on Friday, February 12, 2016. As the equity market claimed some ground, gold and silver fell 0.71% and 0.03%, respectively. The fall in these metals also took down a few mining stocks. However, most of the miners saw an up day.

Hecla Mining (HL), AngloGold Ashanti (AU), and Kinross Gold (KGC) rose 2.7%, 2.5%, and 3.5%, respectively, on Friday. These three stocks together make up 8.9% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

These miners are equity assets and likely rose as the overall sentiment in the market was aired. Most of the time, these companies follow the trend in precious metals, but at times they behave as equity, which can determine their price directions.


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