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324-Day Cycle Points to Spike in Gold Volatility

Did the U.S. presidential election cause a spike in gold's volatility?

by Bob Stokes
Updated: November 10, 2016


[Editor's Note: The text version of the story is below.]

On Nov. 9, the behavior of gold was similar to stocks and currencies; they all had big moves.

Gold had a wide trading range of $68. Its price surged to $1337.81 in the futures market late the night before, and then fell to $1269.51 during New York hours.

Mainstream analysts and the financial press attribute gold's rise in volatility to the U.S. presidential election:

  • Gold's U.S. Election Volatility (Bloomberg, Oct. 10)
  • US elections will push gold to hit $1,500: Technical analyst (CNBC, Oct. 31)
  • Gold Prices Brace for Volatility as Election Day Looms (Nasdaq, Nov. 4)
  • Gold Investors Shift Gears As Election Volatility Spikes (Wall Street Journal, Nov. 7)

But were investors' worries about the U.S. election the real reason for gold's volatility spike?

More than a month ago, our October 2016 Elliott Wave Financial Forecast provided this analysis and forecast:

Gold’s sideways trading range since late June coincides with a steep drop in volatility, as shown on this graph. The CBOE Gold ETF VIX index is down over 39% since June 24 and last week hit its lowest level in over a year. Low periods of gold volatility precede high periods of volatility, similarly to other assets, and we expect gold’s VIX to jump in coming months. A 324-day cycle, shown to be turning up on the lower part of the graph, is compatible with a rise in gold’s VIX. 

Right after our forecast, gold's volatility started to rise.

Our Nov. 9 Short Term Update showed this chart and said:

The chart zooms in on Gold's VIX (GVZ) from May to the present and shows that volatility jumped 53% from September 30 to November 4, and has dropped sharply over the past three days.

Don't be surprised if the volatility in gold continues.

Gold hit a low of $1046.20 on Dec. 3, 2015. By July 6, the yellow metal hit a high of $1375.53.

Midday on Nov. 10, gold traded at $1265, and investors are wondering if the precious metal will make another stab at its high.

Right now, the Wave Principle is offering valuable insights.

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