Gold Volatility

Gold 30-day implied volatility spiked higher as the metal was aggressively sold starting Friday.  Selling pressure culminated in a decline of 10% on Monday.  The size and speed of the selloff coupled with the abrupt rise in volatility easily classifies this rout as a tail event, hedgeable with the right strategy.  However, like all hedges, it needed to be in place before the selloff.  Nevertheless, depending on investors' views, there remains plenty of scope to hedge out a further decline.  Although the recent spike in vol is significant, gold vol reached 50% during its 2008 decline of over 30%.

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