How Is the Equity Market Impacting Gold?



Risk appetite

Gold enthusiasts seem to be in a fix, as any further movements in the precious metal are currently unclear. Fluctuations in precious metals are also closely reflected in the funds that track these metals. The world famous and widely used SPDR Gold Shares ETF (GLD) has risen ~11% in 2017 so far.

The changes in gold and other precious metals over the past few months have been significantly influenced by the US dollar and the performances of risky assets. Equity markets (SPX) (SPX-INDEX) are an integral part of the overall economy. They provide a view of the risk-taking capabilities of global investors. The markets often scale appropriately when investors’ risk appetites rise.

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Mining shares

The higher the returns from the equity market, the higher the predicted risk appetite and the lower the demand for risk assurance. Gold, as we know, is a haven asset, and its demand usually rises during uncertain times. If we look back to the 2008 crash, investors started swiftly transferring their money from equities to precious metals. After that, gold reached an all-time high.
If equities start performing better under President Donald Trump, chances are that haven demand for gold will be negatively impacted.
Though mining companies such as First Majestic Silver (AG), Aurico Gold (AUQ), Randgold Resources (GOLD), and Kinross Gold (KGC) are part of the equity market, they may react more strongly to movements in precious metals.

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