Yahoo Finance Is There a Disconnect between Chinese Equities and Gold?
Why Gold Remained an Outperformer among Commodities
Equity markets
On Thursday, February 25, the Asian markets retreated, with China’s Shanghai Shenzhen CSI 300 Index falling close to 6%. The fall in the Asian market was most likely due to deteriorating economic health and the caution prior to the G-20 meeting. European markets (EZU), however, gave a sigh of relief and rose on the day.
Since the beginning of 2016, investors have been looking for safe-haven assets as global turbulence has caused increased risk aversion. Investors often park their money in gold as the Market gets volatile.
However, the unrest in Chinese markets (FXI) on Thursday was unable to push gold (GLD) higher, and the rest of the precious metals fell, too. Over the past few months, precious metals have been firmly tied to the global equity markets and have developed an inverse relationship.
Miners may be affected
The steady gold prices, along with rattled Chinese equities, may indicate gold has finally untagged itself from the giant economy’s crisis. Investors, however, continue to look for further direction from the overall world markets for long-term changes in gold prices. Gold price movement also affects investors in precious metals mining stocks like Gold Fields (GFI), IAMGOLD Corporation (IAG), and NewGold (NGD).
Most of the time silver acts as a safe-haven investment along with gold. On the other hand, platinum and palladium often show their industrial appeal and directly follow the trends in the overall equity markets.
In the next article in this series, we’ll discuss the technical indicators that are helping gold outperform its peer precious metals.
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