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How Market Uncertainty Affected Gold



Trump and instability

The continued turmoil in the markets in 2016 was one of the major determinants of precious metal prices. The last quarter of 2016 also saw Trump’s victory in the elections, and precious metals rose due to the expansionary spending plan. We might see instability in the US economy for the next four years. The performance of the US dollar and the US stock market may also be jeopardized by Trump. The price of gold usually surges higher as instability in the market increases.

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Funds and mining stocks

The graph above depicts the price changes in gold and the Volatility Index (or VIX) during 2016. Although gold and volatility typically track each other, the graph shows that they can also deviate. At the end of 2015, there was a higher correlation between the two indicators.

Due to the price reversal in the metals, funds that are based on these metals such as the SPDR Gold Shares ETF (GLD) and the Sprott Gold Miners (SGDM) also revived. They saw a rise of 2.2% and 9.6%, respectively, on a 30-day trailing basis.

Mining stocks like Alacer Gold (ASR), New Gold (NGD), First Majestic Silver (AG), and Alamos Gold (AGI) also saw their prices rise during the same timeframe.


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