Kudos to Robert
As a blogger, there’s nothing better than when you’re reader community is actively involved in whatever the pressing issue ails you.
I received lots of possible solutions to my recent report which noted the divergence in daytime and overnight volatility in the gold index (XAU), but a big thumbs up to Robert for determining that the divergence was in fact just a change in how the index was being calculated.
Robert broke the index down into its constituent parts to show that the overnight volatility was still there, but the gold index just no longer accurately reflects it. I’ve included a graph below of the gold ETF (rather than index) GLD that shows overnight volatility still in lockstep with daytime volatility.
Lesson learned? Gold is still very much driven by what happens in the overnight market; however, as of some point in 2007, the opening price on the XAU gold index is no longer accurate and can no long be used in analysis.
Case closed.
Happy Trading,
ms
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Filed under: Gold & Precious Metals | 2 Comments
Please can you explain how you’re calculating volatility — a range of 0.5 to 1.1% seems implausible.
Rolling 1-year standard deviation of daily % changes in daytime and overnight.
Can you be a little more specific – what part seems implausible?
ms