It has been a few weeks so as a reminder the price of gold got obliterated back in the middle of April. Before the drop the average weekly range for the SPDR Gold Shares ETF (GLD – 134.43) was about 3.30 in 2013. Since what appears to be a quick readjustment in the price of gold the average weekly range had been 5.80. That was until this week where a new calm has overtaken the gold market and the result was a high low range for GLD this week of only 2.59. This sort of price action has a way of pushing down implied volatility, especially in commodity related markets. GVZ was down almost 12% on the week and the GVZ curve returned to a ‘normal’ shape for the first time in weeks. Before April GLD had established a pretty reliable range. It appears that GLD may be establishing a new range. A range bound market does not lend itself to higher volatility.
Despite a potential escalation and bigger powers taking more aggressive sides in Syria, oil volatility dropped this past week. The non-quantifiable risk premium that can be associated with the political state of the Middle East appears to continue to be non-existent. So far the markets have been correct in not predicting any sort of price spike in oil based on increasing hostilities.