Gold Price Volatility is the Lowest for Almost 20 Years but Will Not Stay There Forever

The price of gold is now just below the price it was at the beginning of the year. The price rose 5% (around $65 per ounce by mid-February) as global ETF holdings of gold declined and futures contracts on futures declined by 60% so far this year.

January’s historic price volatility was at the lowest level since 2000. While price volatility has risen, the expected 30-day volatility is now at its lowest level in more than 10 years. Both were below their average in the long run for more than two years, which is unusual. Last time the price volatility stayed below average for such a long time was throughout the 1990s.

However, volatility will not remain this low forever and can suddenly change. The decline in bond yields and the bullish gold price despite the strength of the dollar all make the safe haven metal more appealing to traders. The gains recorded by the stock markets caught the attention of investors, but there are many issues ranging from Brexit to the controversial US-EU trade talks that could increase economic uncertainty and, thus, further increase interest in gold.

Gold fell as stocks and the USD recorded gains. The dollar index reached 98 points, the highest level since May 2017 as the US economy continues to outperform the European economy. Strong results from US companies managed to lift the S&P index to a new all-time high, and many stocks have seen strong rebound this year. Gold was getting less attention and fell to its lowest level in the last four months at $1266 an ounce.

The price of gold recovered last weekend and the dollar index fell slightly despite the strength of US data in the first quarter, especially the powerful Q1 GDP data.

The silver market was in a small deficit in 2018, with demand rising by 4% and supply down 2% according to the 2019 World Silver Survey. However, the silver price was weak in 2018, down 8.6% on the year, compared to just a 1.6% drop in the price of gold.


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