Gold price, gold price volatility points:
- Gold prices rose strongly, seemingly out of touch with the dollar and US Treasury yields
- Gold price volatility, stock market volatility and Treasury market volatility have all soared over the past 24 hours
- The price of gold has once again risen alongside the volatility of gold prices
Gold prices have risen sharply, and the reason is...
Gold prices rose sharply yesterday, refreshing this month's and year's highs. Although both U.S. Treasury yields and the U.S. dollar have retreated, the former has seen very little movement relative to the increase in gold prices. One reason that could explain this disconnect is that yesterday was the option expiration date for volatility contracts.
Several measures of volatility remain at a futures premium, i.e., near-month contracts are trading at a lower price than forward contracts. As traders move their volatility exposure forward, they are forced to buy contracts with higher prices. As a result, the indicators of U.S. stock market volatility and bond volatility — VIX and MOVE — both moved higher yesterday. This also affected precious metals, and their volatility indicators also rose sharply.
Gold price and gold price volatility return to normal
Historically, unlike other asset classes, there has been a positive correlation between gold prices and gold price volatility. While other asset classes such as bonds and equities do not like increased volatility because it indicates greater uncertainty in terms of cash flow, dividends and coupon payments, gold tends to benefit during periods of greater volatility. Whatever the reason for the increased volatility – option expirations, or perhaps a larger concern about geopolitical tensions in Eastern Europe – gold prices have indeed benefited.
As of the author's article, the volatility of gold prices is reported at 15.48, and the 5-day correlation coefficient between gold prices and gold price volatility has recently returned to normal levels rapidly, with +0.78 and -0.12 on the 5th and 20th, respectively, and -0.28 a week ago.
Technical analysis of gold prices
Daily chart of gold price movements
The author previously pointed out that the slow but certain upward technical structure of gold prices suggests that gold prices will eventually stand at 1835, which may lead to significant selling opportunities, especially when the US dollar is also in a significant support/resistance level.
However, as the barriers of 1835 are cleared, traders may want to look a little higher before exploring new selling opportunities. The next set of resistance levels is around 1860-1870, which is also where the upward trend line intersects with the lows of May 2019, March 2020 and March 2021.
Weekly chart of gold price movements
The long-term technical outlook on the weekly chart of gold prices remains unchanged: seasonally, January is still the best month of the year for gold prices, so in the short term gold prices will also be supported by quantitative buying. On the weekly chart, the 4, 8 and 13-week EMA moving averages are leaning upwards, the MACD indicator is moving higher above the signal line, and the slow stochastic indicator is also moving higher above the midline, and the gold price rally has strengthened in recent weeks, providing technical support for gold prices to move higher in a fundamental headwind environment.
- Make every transaction with a rigorous attitude!
- Serve customers, based on the industry!
- If the article is helpful to you, liking and following is our greatest support, thank you!