After holding support in the 114 – 115 range two weeks ago the SPDR Gold Shares ETF (GLD – 117.12) worked higher last week rising just over 1%. Gold volatility dropped with the CBOE Gold ETF Volatility Index (GVZ – 19.10) down over 9%. The futures followed the index down with the January contract off by 5.58%. I’ve beaten this one today death, but when GLD approaches the 114 – 115 range I’m watching GVZ closely. So far tests of support have not resulted in GVZ moving up out of concern. So far GVZ action has been right.
For the second week in a row the CBOE Crude Oil ETF Volatility Index (OVX – 15.74) achieved a new all-time low by closing at 15.20 on Thursday. This dip in volatility continues despite crude oil futures topping the psychologically significant $100 level. There is probably a combination of fundamental and geopolitical reasons behind the current low volatility in USO option prices. The flip side is that traders who believe any sort of price shock (higher or lower) in the price of oil has opportunities to take relatively inexpensive option positions based on their outlook.