This Week in Gold and Oil Volatility

Gold and Oil both traded higher last week based on their respective underlying exchange traded funds GLD – 167.82 and USO – 31.75.

GLD traded back above 165.00 which appeared just a week ago to be a significant support level that had been violated. The reaction from GVZ and the two front month GVZ futures was to move down which is an indication for commodities that muted price action in either direction is being anticipated by gold traders for the couple of months. Looking out to 2013 – both January and February futures traded higher, could be gold traders are more concerned about the fiscal cliff and a potential impact on the dollar which then may impact the price of gold.

OVX was down and all futures were up this week. A pretty unusual move, but the volatility of commodity prices does not follow a cookie cutter type of pattern like volatility trading around stock indexes. The best explanation I can get on this twist of the curve is a combination of seasonality for energy prices (higher) and the economic impact if the government does not avoid a budget catastrophe (lower).