How Gold Moves in Relation to the Stock Market



Equity indexes

Aside from the dollar’s impact on precious metals, another core contributor to the recent rise and fall of precious metals is the performance of the equity market. On Monday, October 2, the global stock markets witnessed a pullback in their prices. The SPX Index, depicted by the SPDR S&P 500 ETF (SPY), rose 0.42% on Monday and ended at $252.30.

The chart below shows the comparative price performance of gold in relation to the SPY ETF or the stock market as a whole over the past three months.

[marketrealist-chart id=2366508]

Longer-term diversions

Like their inverse relationship with the dollar, precious metals also seem to be inversely related to equities in general. The equity markets symbolize the risk-taking ability of the investor in general. The higher the risk-taking ability, the more investors would incline toward stocks, avoiding haven assets like gold and silver. In the medium to long run, stocks and precious metals tend to deviate from each other.

Due to the Chinese Golden Week holiday, the demand for gold was comparatively weak. It is expected that as the Chinese return to the markets for investments, the price of gold may react positively. Chinese participants play a major part of the gold market (GLD).

Among the mining shares that rose on Monday despite the decline in precious metals are Hecla Mining (HL), IamGold (IAG), Barrick Gold (ABX), and Coeur Mining (CDE). These miners fell 1.8%, 1.3%, 0.12%, and 2.3%, respectively.

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