This Week in Gold and Oil Volatility

The SPDR Gold ETF (GLD – 162.60) broke another significant support level last week on the heels of the jobs report. The 170.00 level had held for a few weeks and there was a general feeling the trading range for GLD between 170.00 and 175.00 was a rest before the next leg up. 170.00 did not hold and 165.00 became a new support level, but that appears to have been violated as well. What is interesting with this second broken support is the reaction of GVZ. GVZ rallied this past week to close above 16, which had been a resistance level for a few weeks.  Does this jump in GVZ that corresponded to the break in GLD mean there is more downside on the horizon for the price of gold? Not necessarily as GVZ will move higher based on the anticipation of a big move higher or lower in the underlying market. However, the increase in volatility of options on GLD means the market is bracing for some more big moves in the near term.

OVX futures all traded lower on the week despite a rise in the underlying index. This came with a drop in the United States Oil Fund (USO – 31.35). A read on this may be farther dated options pricing in less geopolitical risk over the next few months. Whether this is just a refocus of trader’s attention on the recent storm or a true lowering of concern over the eruption of war in the Middle East is left to market pundits. It may be also attributed to the US elections coming up this week with nothing having ‘happened yet’ as far as the standoff with Iran goes.