This Week in Gold and Oil Volatility

The SPDR Gold Shares ETF (GLD – 165.93) was as quiet as quiet gets considering the volatility in the equity market this past week. GLD dropped less than 1% and GVZ ticked down a bit as well. Many headlines have been touting a next leg up in the price of gold, with one $5000 prediction leaving many scratching their heads. An indication of an anticipated big move in gold higher or lower can be GVZ futures prices. Unlike equity volatility, the volatility of gold options will move up based on an anticipated rally or drop in the underlying market. As the index moved lower so did the futures contracts. GVZ is at historically low levels and the futures indicate that traders are not placing bets on a big move in GLD over the next few months. For the near term the GVZ market is not anticipating and big move, but like everything in the financial markets, this could change quickly.

Oil was down and OVX ticked up a bit last week. Oil always has some geopolitical premium associated with the price and the volatility of oil options can be inflated based on the anticipation of an event that will result in a higher oil price in a very short period of time. OVX ticking up in a quiet oil market indicates that options and volatility traders are still nervous about a big move in the price of oil.GVZ OVX.jpg