uploads///Gold versus VIX indicator

How the UK Elections Played on Precious Metals


Jun. 14 2017, Published 9:32 a.m. ET

UK elections

Gold fell again on Friday, June 9, 2017, for the third consecutive day. It touched a low of $1,264.80 per ounce and then settled at $1,269.50. Silver joined in and fell about 1.1%, closing at $17.30 per ounce. Platinum and palladium, however, saw an up day.

The movements were probably affected by the UK elections on Thursday, which were surrounded by speculation and ended up with no single party able to claim control of the government. Incumbent Prime Minister Theresa May’s Conservative Party failed to secure a majority in the elections. She intended to bring in a stronger majority party before divorcing the European Union.

Many investors expected the ongoing election concerns to give gold a boost as a safe haven asset. But that didn’t happen.

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Volatility index

When we analyze global concerns, we often look at the CBOE Volatility Index (or VIX). The above graph compares the performance of gold (GLD) to the CBOE Volatility Index (or VIX) (VIXY) (VXX), which was trading at 10.7% on Friday, June 9.

As you can see in the graph, volatility and gold often walk hand-in-hand during turbulent times since gold is famous as a safety asset. But since volatility didn’t rise much after the UK elections, the risk sentiment in the market was likely under control, and gold and silver maintained their downward pace.

The fall in these two metals also took down most of the precious metal mining stocks, including Franco-Nevada (FNV), Primero Mining (PPP), Silver Wheaton (SLW), and Randgold Resources (GOLD). On Friday, June 9, they fell 2.1%, 2.3%, 2.5%, and 1.6%, respectively.


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