This Week in Gold and Oil Volatility – 6/6/2014

The price of oil is sputtering around and going nowhere. The result is that like VIX the CBOE Oil ETF Volatility Index (OVX -14.50) managed to close at a record low level on Friday. OVX data goes back to 2007 and 14.50 was the lowest close since December 26, 2013. For accuracy sake I’ll note that Thursday OVX closed at 15.14 and that record low stuck for 24 hours.


Friday nights I am usually doing my best to make sure the couch does not move and I indulge myself in watching the previous week’s Charlie Rose episodes. Airing on Bloomberg means that I see some market headlines from the previous week as I am being impressed by someone that has established themselves as the master of some sort of field. One headline that caught my eye paraphrases as, “Gold traders bored silly as volatility is at a 14 month low” (It was the word volatility that caught my eye – imagine that). I resisted the urge to jump off the couch and made a mental note to check the accuracy of this statement. This past week GLD traded in a range of 1.46 – the last time the range was that narrow was the last week of March 2013 – about 14 months ago. I did not call up any gold traders to see if they were bored, but I assume that part of the statement was true as well. The narrow range and GLD holding the 120.00 level pushed GVZ down on the week as seen below.


As far as the term structure curves go things shifted uniformly lower based on a complacent market outlook and little current price action. One final thought on Gold – GVZ closed at the lowest level since the first week of April in 2013 – two weeks later we got the biggest move in decades. Don’t take current complacency as being an accurate forecast of a lack of volatility on the horizon.