How Market Volatility Moved Gold on June 25



Precious metals tumble

Despite the choppy trading pattern in the equity markets, precious metals saw downward price movement on June 25. Gold was down ~0.26% and was trading at $1,266.00 per ounce on June 25.

Gold’s three counterparts—silver, platinum, and palladium—also followed suit as they saw downswings in their prices. Silver fell 0.86% to trade at $16.30 per ounce. Platinum and palladium also were down on the same day, dropping 1.3% and 1.8%, respectively, to trade at $867.00 per ounce and $942.30 per ounce.

Gold and the other precious metals typically track the overall volatility in the market. However, that doesn’t always happen. The chart below shows how gold and the overall volatility in the market have reacted over the past few weeks.

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The haven assets

The volatility in the chart above is depicted by the Volatility Index, or VIX (VIXY)(VXX). This is a gauge of sentiment for the overall volatility in the markets. During times of market unrest, investors start moving to haven assets like gold and silver.

Gold and silver are tracked by funds such as the iShares Gold Trust ETF (IAU) and the iShares Silver Trust ETF (SLV). These two ETFs have declined 2.6% and 0.58%, respectively, over the last month. However, VIX has seen a rebound. Reading the correlation charts of gold and VIX yields a correlation of approximately -0.1% on a YTD (year-to-date) basis.

The mining companies that had a negative reaction on June 25 due to a drop in precious metals included Yamana Gold (AUY), Randgold Resources (GOLD), Coeur Mining (CDE), and Pan American Silver (PAAS). These stocks fell 1.3%, 0.83%, 2.2%, and 2.5%, respectively.

In the next article, we’ll focus on the YTD correlation between gold and equities.


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