Is Gold Still Taking Cues from Downturn in Equities?


Aug. 18 2020, Updated 5:18 a.m. ET

Gold hedge

Gold and silver have seen positive yields over the past five trading days. Gold has increased about 0.59% and silver has risen a marginal 0.2% on a five-day trailing basis. The rise in these two precious metals could have also been due to the drop in global equities after the trade war fears deepened.

The performance of gold and silver can be tracked by gold and silver funds like the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV). The movement of these two funds deviated from the rises in their respective metals. GLD and SLV dropped 0.82% and 1.2%, respectively, on a five-day trailing basis. The chart below compares the performance of gold to the S&P 500 Index (SPY) over the past six months.

[marketrealist-chart id=2568018]


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Mining stock performance

On a long-term basis, gold tends to deviate from equity markets. During a market slump, investors often go to gold for safety, while during rising bull markets, precious metals and other havens might not be as popular, and their prices could fall.

Even after positive economic data releases, markets have been slumping, which is also negatively impacting the US dollar. We’ll look at the relationship between gold and the US dollar in our next article. Though the mining stocks are a part of the equities segment, they tend to be more correlated with precious metals than equities.

Mining stocks like Alamos Gold (AGI), Royal Gold (RGLD), Goldcorp (GG), and Cia De Minas Buenaventura (BVN) have risen 3.1%, 2.6%, 0.80%, and 9% during the last five trading days, respectively.


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