uploads///Gold versus VIX indicator

Are Gold and Volatility Moving Together?


Dec. 4 2020, Updated 10:52 a.m. ET

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.

Article continues below advertisement

Dual impact on gold

Another important market phenomenon that investors often look at when investing in gold is inflation. Gold is used as a hedge against inflation. A reduction in volatility could mean a downward swing for gold, and an increase in inflation could mean more demand for gold. That relationship could be a two-way street for gold, and its direction remains uncertain.

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.


More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.