#Gold and #Silver Rebound Following Friday’s Sharp Selloff, While Crude Oil Plunges 7.5%, Implied Volatility Rises, and Implied EFPs Remain Below OTC Rates

One day ahead of the U.S. midterm elections, gold and silver staged a partial recovery from Friday’s sharp selloff, while crude oil fell an astounding 7.5%, or approximately $8 per barrel, to $96.26. Not surprisingly, one-month at-the-money (ATM) implied volatility in both metals is beginning to rise ahead of tomorrow’s elections. Gold volatility has increased to 22%, compared with 19.3% on October 22, while silver volatility has climbed to 40.5%, up from 33% over the same period. Meanwhile, implied EFP rates remain below London OTC rates: Gold: December EFP at $10, implying 3.38%, versus 3.94% OTC. Silver: December EFP at 4.5 cents, implying just 1.19%, significantly below the 3.8% OTC rate. This divergence between futures-implied financing rates and the OTC market remains an important indicator to monitor. All eyes are now on tomorrow’s midterm election results. We also need to remain mindful of geopolitical headlines, particularly developments involving Iran, as well as upcoming U.S. economic data. These factors will influence crude oil prices, interest rate expectations, and the FOMC outlook. The longer-term fundamentals for gold and silver have not changed. We remain in an era of de-dollarization and central bank reserve diversification, with gold continuing to play an important role in the global monetary system. The fact that countries such as Russia and Turkey have sold gold at various times does not undermine its monetary significance. If anything, it demonstrates gold’s unique role as a highly liquid reserve asset that can be mobilized when needed. Gold remains the ultimate monetary asset, but short-term volatility and market positioning still matter. Patience remains essential.

For educational and informational purposes only. Not investment advice.