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What Drove Gold and Silver Upward?


Mar. 26 2018, Updated 3:55 p.m. ET

Precious metals rise

The two most critical precious metals, gold and silver, rose on March 23, rising 1.4% and 1% in spot markets. Platinum ended the day flat, and palladium was down by 0.4%, as it mostly follows industries.

Donald Trump’s step towards anti-China tariffs brought some unrest to markets, which likely led to haven bids for gold and silver rising. On March 23, China also unveiled plans to impose tariffs on up to $3 billion in US imports, likely in retaliation to US tariffs on Chinese steel and aluminum.

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The rise in these two metals also boosted the iShares Gold Trust ETF (IAU) and iShares Silver Trust ETF (SLV), which rose 1.4% and 0.91%, respectively, that day. In the last five days, the funds have risen 2.5% and 1.2%. Precious metals often respond to market uncertainty and may closely track the CBOE (Chicago Board Options Exchange) Volatility Index, or VIX (VIXY) (VXZ).

VIX and gold follow the same path

The VIX Index had risen to ~24.9% as of March 23. The above chart shows that, for most of March, gold and the VIX have followed the same path. Their correlation is often stronger when markets are troubled. However, this year, these two have had a mere correlation of -0.22, which indicates that gold and the VIX have diverged ~22% of the time.

Mining stocks that rose alongside gold and silver due to fears of global trade wars included Kinross Gold (KGC), Buenaventura (BVN), Alacer Gold (ASR), and Yamana Gold (AUY). These stocks rose 5.8%, 0.95%, 1.9%, and 4.4%, respectively.


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