Oil futures dropped a couple of dollars last week to settle in the 102 range and the response from USO volatility in the form of the CBOE Crude Oil Volatility Index (OVX – 15.61) was a small drop as oil may be range bound between 100 and 105. Range bound markets, especially commodity oriented markets, result in a drop in expected volatility.
While oil was staying in a range, gold was breaking out (specifically down) of a range this past week. In addition to the GVZ price chart below I put together a weekly chart of the SPDR Gold Shares ETF (GLD – 120.43) that illustrates a shift in the price of gold that occurred last week.Note the chart below has a couple of reddish lines that indicate a couple of former support levels for GLD in 2014. One was a support level that followed along as GLD moved up and the second is a support line in the 123 range that GLD had bounced off of a few times over the past few weeks. Note the blue line, that’s where GLD has tested multiyear lows over the past few months. If GLD gets down to the 116 range people will be watching closely as there is nothing in the form of support if that levels is breached.
The OVX curve was little changed along with the spot index moving down slightly. The GVZ curve change was a pretty parallel shift and the June future is at a slight, but not dramatic premium considering the somewhat precarious story that is being told by the GLD price chart above.