This Week in Gold and Oil Volatility – 11/1/2013

The SPRD Gold Shares ETF (GLD – 126.95) was unable to develop support in the 130’s and returned to a price range that has been ‘home’ for a month or so – the upper 120’s.  The low this year is 114.68 and a breach of that price would bring out the gold bears in force.  There are several voices calling for lower gold prices and a new 2013 low would result in an awful lot of self-congratulatory commentary.  Also, a break in price would probably be proceed by a run up in gold volatility as the level is approached along with a spike while the price of gold searches for a new support level.  The parallel shift in gold volatility trading last week indicates some creeping nervousness regarding the prospects for GLD.

The United States Oil Fund (USO – 34.13) stair stepped lower throughout the week.  The lower price action was fairly orderly, but did result in OVX rising by almost 5%.  The front month November contract traded up by 2.51%, but the other futures contracts were mixed which indicates a little near term concern, but longer term volatility expectations are relatively tame.

GVZ OVX

 

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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