In the World Gold Council’s (WGC) last quarterly research piece, the authors find that ‘average gold price volatility is lower for each represented year since 1980’ meaning that ‘gold also becomes less susceptible to sharp swings, heralding its value as a tail-risk hedge’. This statement got us thinking about what the future has in store for future gold price volatility, given that many market participants forecast greater volatility in other markets. In particular we think of the superbly eloquent Rick Rule, who looks for greater volatility presenting itself in a great range of markets as pressures within the financial system build.
Whilst we do not know exactly how the WGC quantify and measure price volatility, and it is perhaps not surprising to learn that volatility had been declining for some time since the frothy peak of the last bull market in 1980, our thoughts turned to current and future legs of this apparent gold bull market. After the white hot 1980 peak gold bugs suffered two lost decades as gold cooled to become a veritable back-water and Chairman Volcker brought some financial discipline to the world. The chart below might suggest that since the start of this bull market in 2000, a gradual rise in price volatility may have been evidencing itself. 
To today’s gold investor it does feel that price volatility might be on the increase and another graph from the Chicago Board of Options Exchange seems to suggest that recently this sentiment might be correct.
As gold enters a more mature phase of a bull cycle perhaps the action is hotting up, and greater participation and speculation are bringing attendant increases in price volatility. The right hand part of the graph below does suggest more violent price oscillations either side of the directional trend line than shown on the left prior to the Credit Crunch of 2008.
Within this potential recent volatility the press’s reporting of gold has maintained its previous form. That of being less likely to report rises in the gold price, than to report falls as ‘shocking’ collapses. Although only relevant anecdotally, gold investors might be surprised about how they are approached by friends asking about recent gold price crashes more often than by friends who…
