Rising Volatility for Gold

Having soared 15 percent during the first four months of 2024 to the $2,400 an ounce level, it would be natural for gold to pull back and consolidate some of its gains. That is precisely what occurred during the last full week of April. It would also be natural for the gold price to see more swings in the near future. A rising price can attract buyers who want to ride the gold market’s momentum, but at some point, sellers are motivated to take advantage of higher prices by unloading their holdings.

Gold, though, is not an inherently volatile investment. Looking back from April 2024, gold over the past 5, 10, 15, and 20 years has been less volatile than major stock market indexes.

The London Bullion Market Association (LBMA) PM gold price has had an annualized volatility of 15 percent during the past five years. In contrast, U.S. stock indices have had volatilities above 20 percent, with the Standard & Poor’s 500 Index at 21 percent and the Russell 3000 Index, a measurement of the largest 3,000 publicly traded U.S. companies, with a volatility of nearly 28 percent. For the past ten years, gold’s annualized volatility stands at 14 percent, while the S&P 500’s volatility is 18 percent, and the Russell 3000 volatility is almost 23 percent. Gold’s volatility was almost 16 percent for the past 15 years, while the S&P 500 saw volatility of almost 18 percent and the Russell 3000 had volatility of 23 percent. Finally, for the 20 year period, the gold price experienced volatility of 17 percent. Compare that to 19 percent for stocks as measured by the S&P 500 and nearly 25 percent for the Russell 3,000.