uploads///Gold price versus Volatility Index

How Market Unrest Is Affecting Gold


Apr. 20 2018, Updated 3:20 p.m. ET

Market unrest

If we look at the historical performance of precious metals to markets, we see that gold has been closely tracking market volatility. The recent upheaval in the markets, led by Syria tensions, supported precious metals. Also, the earlier trade war fears with China lifted precious metals higher.

The below chart compares the performance of gold (IAU) to the overall volatility in the market. We saw these two indicators moving together during the end of March and the beginning of April. The last one week has seen a divergent performance. The Volatility Index, or VIX (VIXY) (VXZ), was close to 24% at the end of March.

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Gold hedge

As gold is famously known as a haven asset, market unrest and uncertainty make it more valuable. Investors often opt for safe-havens like these as the market gets unstable and geopolitical tensions rise.

Another indicator that gold tends to keep track of is the equity market performance. Often, when the equity markets rise, investors opt for these yield-bearing assets, which causes gold to fall. The two often give divergent performances.

Though the precious metal mining companies are broadly a part of the equities, they often take their directional move from gold and other precious metals. Mining stocks like Alamos Gold (AGI), B2Gold (BTG), First Majestic Silver (AG), and Sibanye Gold (SBGL) rose 1.1%, 1%, 2.1%, and 6.2%, respectively, on Wednesday.


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