Gold Prices, Google Searches and S&P Volatility Index

Well, I didn’t get sunburnt after 3 weeks at the beach, however it was good to get away.

Below is a chart from a series that The Economist produced entitled Charting 2011. It shows the correlation between google searches in the US for the “Gold Price” and the “S&P 500 Volatility Index”.

Often referred to as the fear index or the fear gauge, the S&P 500 Volatility Index (VIX) represents one measure of the market’s expectation of stock market volatility over the next 30 day period. It is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, which is then annualized. Wikipedia

However it is interesting to relate the above chart to that of the actual gold price for 2011 – see below. Here we can see that there is a reasonable correlation between the actual gold price and the google searches and the VIX. Gold prices rose once again from the turbulence on world markets and recorded its 11th straight gain. Will gold prices continue to rise? The fundamentals that have pushed up the price of gold are still evident, namely:

– the problems of debt within the eurozone
– the concern of a double dip recession in a lot of the larger economies
– the increasing demand for gold jewelry amongst the developing economies such as India and China.

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