The price of gold worked higher last week in a very orderly fashion. Friday the SPDR Gold Shares ETF (GLD – 130.46) topped 130.00 and closed above that level for the first time in several weeks. The combination of a higher GLD and the slow walk higher resulted in much lower volatility in the GLD option market. The CBOE Gold ETF Volatility Index (GVZ – 19.90) was down over 7% on the week. However, the futures market did not quite have the same drop as the index. The GVZ futures contracts all moved in a pretty parallel fashion relative to the drop in GVZ.
Oil volatility also came in last week and lost over 7%. However, the curve reacted little differently. Last Friday the November future was at only a 0.26 premium to OVX. That premium widened this past week. The front month future only dropped 0.15 and is now at a premium well over 1.50. All volatility futures markets based pricing on the anticipated level of the index, the November future correctly anticipated the drop in the implied volatility of oil options.