Gold Price Recorded Lowest Volatility Level in More Than 20 Years

SEATTLE (Scrap Monster): The July 2018 edition of ‘Gold Investor’ published by the World Gold Council (WGC) states that gold prices reported their lowest volatility levels in more than 20 years in 2017, despite passing through an eventful year. The daily average move during the previous year was 0.5%, significantly down from 0.7% recorded during all the three years prior to that.

According to Matthew Turner, precious metals analyst at Macquarie, there was not even a single day during the previous year when gold ended more than 2.5% higher or lower from the previous day closing price. This has happened for the first time after 1996. Incidentally, five such days were reported in 2016. On a monthly basis too, the gold volatility stood low. For instance, there was only one month in 2017 when gold moved by more than 5%, as compared with 5 such months in 2016.

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Typically gold prices are far less volatile than many other commodities including crude oil. Over the past decade, the gold price has changed by an average of 0.8% on a daily basis as compared with aluminum’s 1%, copper’s 1.2%, oil, palladium and silver’s 1.4% and nickel’s 1.5%. This is partly attributable to gold’s high traded volume, especially since the introduction of ETFs and similar products. In short, gold’s extremely low volatility in 2017 was driven by many short-term and long-term, physical and financial factors.

Going forward, WGC doesn’t expect chances of a sharp reversal in the near-term. Gold has so far remained immune to turbulent markets in 2018. It has been less volatile than at any time since the early 1970’s. Although some factors such as low-interest rates are likely to soon come to an end, other factors such as strong price-sensitive demand may still help gold to maintain low volatility levels.