The CBOE Gold ETF Volatility Index shot upward Monday as Euro concerns pushed investors into an increased "risk off" posture. In doing so the U.S. Dollar hit a 4 month high and the largest gold ETF, GLD, fell around 1.4%. In a much larger move GVZ, the CBOE Gold ETF Volatility Index, rose 8% finishing just above 20. Here's a chart from the CBOE showing the last week's worth of movement in the index and Monday's rocket shot upward.
(click to enlarge)
Physical gold ETFs like GLD and IAU have been tracking the price of gold downward since late February. After a rough session on Monday, that downward move finally erased all of gold's 2012 gains and pushed gold into negative territory for the year. Here's the stockcharts.com chart showing GLD's performance year to date.
(click to enlarge)
Gold has become of victim of a variety of factors including a stronger U.S. Dollar, lowered expectations of a QE3 and until Monday, a target for investors to raise cash. The move to negative territory Monday was significant for gold investors and likely contributed to the surge in volatility. Still the gold ETF VIX is well below its one year highs which reached the 40 level. Here's the one year chart with a 50 day moving average overlay. Note that the 50 day average has just been broken.
(click to enlarge)
Going forward it appears there will be higher levels of gold ETF volatility based off the tone in Europe. In the short term this is probably bad for gold ETF investors as the current volatility is tied to the "risk off" trade which is pro dollar and weighing down gold. Over the long term, however, gold's decline may just prove to provide attractive price points for investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
