This Week in Gold and Oil Volatility – 11/22/2013

The market that has really kept things interesting in 2013 is the gold market.  The SPDR Gold Shares ETF (GLD – 119.92) is down about 26% on the year and GVZ has been in a wide range with a low of 12.07 and a high of 34.48.  Friday’s close of 20.33 actually puts GVZ in the lower half of price action this year.  I find that a bit interesting as the news of John Paulson choosing to not add to his long gold exposure caused GLD to have its worst week since September.   As a nice illustration of what has happened in the gold and gold volatility markets this year see the chart below.


The reason I wanted to put this chart up has more to do with GLD than GVZ.  GLD is testing lows that were put in back in late June.  A break of that support could be taken by gold bulls and bears alike as a signal for much lower prices.  In fact a technician that presented this week at the Trader’s Expo was calling for GLD to get down to 102 in the next six months.  I don’t think GVZ is indicating that support is going to be broken.  When the market doesn’t anticipate something the move can often be exacerbated.  If GLD trades under 114-115 in the near future we may just see an example of an exacerbated move.

The oil volatility market was lower last week with OVX dropping and the futures dropping in a very parallel manner.   The political risk in the oil market is adjusting as the US and Iran appear to be on speaking terms.  The futures and index action anticipates that the potential deal with Iran is taking some of the political risk out of the oil market and seems to at least initially indicate that there should be no flare up in tensions in the Middle East that will result in an oil price spike.

OVX GVZ Corrected