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The surging dollar and plummeting oil prices are posing a threat to gold?s recent rebound from a four-year low.
Options that protect against declines in a popular fund tracking gold have risen in price to the highest level in 15 months compared with a similar gauge for U.S. equities, according to data compiled by Bloomberg. The Chicago Board Options Exchange Gold ETF Volatility Index, which tracks derivatives prices on the SPDR Gold Shares (GLD) exchange-traded fund, climbed 19 percent last week to 25.17, the highest in more than a year.
Decisions by central banks in Europe and Asia to loosen monetary policy spurred a rally of as much as 5.4 percent last month in bullion prices. At the same time, slowing economies overseas have aided the dollar?s rally to a five-year high, which along with the slide in crude, has muted domestic inflation. Investors typically turn to gold as a hedge against rising inflation.
?Gold is in a very challenged state of affairs,? Erik Wytenus, a Palm Beach, Florida-based global investment specialist at JPMorgan Private Bank, said by phone. The division oversees $1.1 trillion in client assets. ?Inflation has remained subdued, which has taken the wind out of gold prices. Inflation in the U.S. and globally is OK, but the world could actually use a little bit more.?
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