As we begin a week full of news, earnings and potential developments from Capitol Hill, US Equities were higher, led by Nasdaq, while volatility remained relatively unchanged. US Treasury futures prices were lower, indicating higher yields, WTI Crude Oil futures were up slightly but Metals, once again, grabbed the headlines.
As we’ve written about extensively over the last couple of weeks, Gold and Silver futures prices continued to rally today. Gold futures prices were up nearly 2% to recent highs while Silver was up almost 8%. With today’s price rally in Silver the Gold/Silver price ratio that we’ve talked about recently dropped to below 80; down from 125 in the middle of March. The Gold and Silver options markets have reacted to the price swings as well. As you can see in the top graph, which depicts 5 years of Silver price and implied volatility action, both are currently at historical highs (especially when you remove the volatility spike we saw with the initiation of the economic shutdowns. The lower graph illustrates the same for the Gold futures and options markets.
The skew shift is equally as dramatic as out of the money Gold Calls are trading about 3.5% higher than Puts and Silver Calls nearly 7% higher than Puts. It is worth noting though, with today’s nearly 8% futures price rally, the Puts were bid versus the Calls relative to Friday’s closing levels.