How Market Volatility Is Affecting Gold



Volatility and gold

Another crucial factor that affects gold is the volatility of the overall market. For the last one month, precious metals (GLD) have been impacted by global market unrest, which includes the US-China trade wars, the Syrian unrest, and North Korea. In March, the Volatility Index (VIXY) (VXZ) was close to 24%.

As gold is considered a haven asset, market unrest and uncertainty tend to make prices rise. Investors often opt for safe havens like these as the market gets unstable and geopolitical tensions rise. The below chart compares the performance of gold to the Volatility Index, or VIX.

Article continues below advertisement

A slowdown in gold

Trump said on Tuesday that the US would likely reach a trade agreement with China and that officials will negotiate in a few days. The tensions over North Korea seem to have subsided as well. With these concerns easing, the demand for safe havens seems to have been negatively impacted. As the markets stabilize, gold and other precious metals may underperform.

Precious metal mining companies have also suffered due to the decline in volatility. Mining stocks like Gold Fields (GFI), B2Gold (BTG), First Majestic Silver (AG), and Wheaton Precious Metals (SLW) fell 4.9%, 3.7%, 3.1%, and 3%, respectively, on a five-day trailing basis.


More From Market Realist