Trump and Brexit
The sudden rise in precious metals right after the election of the much-doubted Donald Trump can be compared to the rise in metals right after the unexpected Brexit vote result. The occurrence of such major unexpected economic events often gives a lift to precious metals stocks.
On November 9, 2016, gold witnessed its biggest one-day rise since the Brexit shock. The market reacted negatively to Trump’s victory and plummeted. This supported the rise in precious metals.
The relative price performance of equities is depicted by the S&P 500 ETF (SPY), while gold’s performance is depicted by the SPDR Gold Shares ETF (GLD). SPY fell to $212.4 per share after the announcement of Trump’s victory. However, it recovered shortly after that. This movement could have been a transition blip.
The performance of the equities market could be a barometer for the health of the economy, and gold takes much from the economy’s perceived economic health. As gold is a famous haven asset, it rises in times of a deteriorating economic outlook and falls in times of an optimistic outlook.
Mining companies belong to the equity segment of investments, but they’re quite dependent on precious metals price movements. Mining shares such as Kinross Gold (KGC), IAMGOLD (IAG), Harmony Gold (HMY), and Alacer Gold (ASR) have seen tremendous year-to-date rises following the rise in precious metals.