uploads///Gold versus VIX indicator

Volatility and Gold Rise with Risk Aversion


Jun. 15 2016, Updated 9:27 a.m. ET

Market volatility

Gold has rebounded from its low level over the past week and has seen four straight days of gains as of June 14, 2016. Gold futures for August expiration were trading in the range of $1,267.30–$1,280.90 per ounce on Friday, June 10, and closed at $1,275.90 per ounce. The gains in gold also buoyed silver, which rose 0.04% on Friday to close at $17.30 per ounce.

The most important driver for gold lately has been overall Market sentiment. Market volatility often gives a positive kick to gold. The safe-haven appeal of the precious metals comes into play when investors look for safety during volatile times. Volatility in the chart above is depicted by the CBOE Volatility Index, or VIX.

VIX came in at 17% on Friday, June 10, 2016. The chart above shows the relationship between gold and volatility.

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Global economic events

Market volatility is likely driven by the ongoing fear of the main economic events taking place. The FOMC (Federal Open Market Committee) meeting, the Bank of Japan’s meeting, and the fear of Brexit, or the United Kingdom leaving the European Union, all have a significant impact on the safe-haven appeal of gold.

Funds that have risen due to the rise in gold and other metals include the Sprott Gold Miners ETF (SGDM) and the Global X Silver Miners ETF (SIL). These two mining-based ETFs have risen 2.6% and 3.9%, respectively, on a trailing-30-day basis.

Miners that were among the top performers over the past month include Alamos Gold (AGI), Royal Gold (RGLD), and First Majestic Silver Corporation (AG). These three stocks have risen 14.8%, 12.7%, and 14.6%, respectively, on a trailing-30-day basis.

In the next part of this series, we’ll look at the most crucial factor affecting gold’s price movement.


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