Will Gold Follow Equities?


Feb. 6 2018, Updated 2:18 p.m. ET

 Gold versus equities

The optimistic economic numbers not only led to a slump in equities on Friday and Monday, but they also helped gold recover from the low it touched on Friday. Gold fell about 1.2% on Friday due to the stronger economic numbers.

The relationship between gold and equities is not very explicit, but the two tend to move away from each other during extreme market scenarios. In the below chart, you can see the performance of gold (IAU) against US equities (SPY). Gold is often a hedge against the rising uncertainty and unrest in the markets.

[marketrealist-chart id=2568018]

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Mining stock performance

On a long-term basis, gold is also known to deviate from the equity markets. During a market slump, investors often go to gold as a safe haven, while during rising bull markets, precious metals and other havens might not be as popular, and their prices could drop.

The mining stocks, though a part of the equities market, are generally more associated with precious metals than with equities in general.

Most mining companies have slumped over the past five trading days. Hecla Mining (HL), Eldorado Gold (EGO), IAMGOLD (IAG), and Cia De Minas Buenaventura (BVN) have dropped 3.9%, 3.2%, 4.3%, and 3.3%, respectively, on a five-day trailing basis.


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