Commodities volatility remains high, but gold is an outlier

Volatility in commodities remains elevated compared with the relatively calm market conditions of a year ago. Most commodities have been more volatile during the current quarter than they were in Q2-2014; at the extreme, annualised volatility in crude oil has been more than 3x higher. Volatility is higher in all energy and bulks, and for all base and precious metals except nickel and palladium. The increase in volatility appears to have created higher volumes in both futures and OTC markets, particularly in energy, and has increased the demand for risk management. 

Amid the general increase in volatility, gold has been on a separate path. There are reasons for believing that gold's volatility might have moved higher, particularly because currency markets have become more volatile. However, higher volatility in the USD, oil and silver, combined with levels of geopolitical and economic risk at least as high as last year, has not increased gold's volatility, which fell to 12.6% in Q2, from 15.6% in Q1, scarcely above Q2-2014's 12.2%. In Q2-2014 gold's volatility was 3.5x of that of the USD, while in the current quarter it has been just 1.2x more volatile. 

"In our view, gold's volatility is too low, in absolute terms and relative to the USD, silver and oil, and we would expect to see a correction in Q3, along with a drift upwards in the price of gold." said Standard Chartered