Gold and volatility
The rise in precious metals over the last few months has been due to insecurity among investors, given the political climate. Gold acts as a buffer to market risk and volatility. Volatility in the market is predicted by the Volatility Index, the VIX (VIXY) (VXZ).
Investors’ uneasiness caused them to invest in assets like silver as well as mining shares and funds. The Direxion Daily Junior Bull Gold 3x (JNUG) has risen almost 100% so far in 2017. The VanEck Vectors Gold Miners (GDX) and Sprott Gold Miners (SGDM) ETFs have risen only 16.5% and 15.1%, respectively.
Dual impact on gold
Mining stocks are also known to follow gold closely. Cia De Minas Buenaventura (BVN), AngloGold Ashanti (AU), Alacer Gold (ASR), and IamGold (IAG) make up about 9.5% of the VanEck Vectors Gold Miners ETF (GDX).
In the next part of this series, we’ll look at the relationship between gold and inflation.