Gold Loses Its Luster As Stagflation Risk Jumps On Iran War

2026-03-24 10:30:00 ET

By Mandy Xu

Cross-Asset Volatility : Implied volatilities were mixed last week as investors weighed the impact of the ongoing Iran war. Oil volatility collapsed as oil prices stabilized, with WTI 1M implied vol down over 40 pts to 72% and trading below realized vol (at 85%) for the first time since the war started. Interest rate volatility gained the most across asset classes, with the VIXTLT Index up 12 pts to 117 bps vol, as rate cut expectations diminished following the FOMC meeting. In fact, markets are now pricing in ~30% probability of a rate hike by year-end (vs. pricing in 1 full cut a week ago and 2.5 cuts a month ago). Gold volatility increased as the precious metal sold off, down over 10% last week as real yields spiked. Despite gold’s reputation as an inflation hedge, its track record has been rather poor in recent years. In 2022, gold fell over 20% from the highs as inflation surprised to the upside. Positioning in the gold options market has also shifted notably in recent weeks as inflation risk has become more pronounced, with demand for puts increasing. After being persistently inverted over the past year (i.e., calls trading at a premium to puts), GLD skew has steepened to a 1-year high, with puts now trading at a premium to calls (Exhibit 2). The unreliability of traditional safe havens (e.g., bonds and gold) in recent years is a key reason behind the rise in options-based ETFs, particularly buffer ETFs, as investors turn to options for portfolio protection (for more, see our “Beyond 60/40” paper ). FLEX options, which are used in the buffer ETFs to give the defined outcome, have grown in popularity, with a record 4.1M contracts trading on Friday (5% of total market volume)....

Read the full article on Seeking Alpha

For further details see: