2024-04-03 04:15:00 ET
Summary
- Implied volatilities fell across asset classes last week in a holiday-shortened week, with the notable exception of gold.
- The extreme bullishness in gold, insofar as it reflects optimism over inflation and Fed policy, contrasts with what we're seeing in the rates market.
- While SPX front-end vols declined last week, longer-dated vols actually increased, leading to a meaningful steepening in the term structure.
By Mandy Xu
Macro Volatility Digest: April 1, 2024
Cross-Asset Volatility: Implied volatilities fell across asset classes last week in a holiday-shortened week, with the notable exception of gold. GLD 1M implied vol jumped over 2 pts to 13.4% as gold prices surged to a new all-time high. GLD skew inverted further, with 1M 25-delta call now trading almost 3 vols over the 25-delta put. The extreme bullishness in gold, insofar as it reflects optimism over inflation and Fed policy, contrasts with what we're seeing in the rates market where expectations of Fed easing has remained largely stable over the past month (when the gold rally kicked off) and US 10Y real yield has been relatively unch'd. On a cross-asset percentile basis (1-year lookback), gold stands out as the only asset class trading with elevated levels of implied volatility (73rd percentile high) while almost everything else is near a 1-year low (see Exhibit 1)....
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Gold Volatility Surges Higher On Upside Call Demand