Jul 5: The low volatility in gold prices compared to other commodities reflect a fundamental changes in the market which could become permanent, according to Mathew Turner.
In an article in Gold Investor, July 2018 published by World Gold Council, Turner points out that despite being an eventful year (First year of President Trump, elections in France and Germany, Brexit, tensions in North Korea) gold price volatility was at its lowest in 20 years.
Gold is considered less volatile compared to other commodities. Over the past 10 years, Gold price has changed by an average of 0.8% on a daily basis compared to aluminium 1%, Copper 1.2%, Oil and Silver 1.4% and nickle 1.5%. This partly reflects gold’s high traded volume compared to underlying sypply and demand especially aftert the introduction of ETFs.
When central banks ease monetary rates as equity downturn happens, again it helps gold as easy money reduces the cost of holding inventory.
Gold has so far remained immune to turbulent markets in 2018. In February, when volatility in the S&P 500 was at is highest since 2012, gold was not impacted.Mine production doesnot respond quickly to changes in gold prices but Asian jewellery demand has some impact on arresting falling prices as it did in 2013