How volatile is the gold price?
The gold price is typically slightly less volatile than major stock market indices, such as the S&P500, and is much less volatile than other commodities. For example, at the end of H1 2008, the 1-year volatilities of lead, copper, and brent crude oil were 48%, 30% and 29% respectively. The corresponding volatility of the gold price was only 20%. Differences of this magnitude are typical. There are good reasons why gold is less volatile than other commodities. First, the gold market is deep and liquid, and is supported by the availability of large above-ground stocks. Because gold is virtually indestructible, nearly all of the gold that has ever been mined still exists and, unlike base metals or even other precious metals such as silver, much of it is in near-market form. As a result, in the event of a sudden supply-side shock or rapid increase in demand, recycled gold can, and frequently does, come back on to the market, hence dampening any brewing price spike. The second reason rests
