One of the most common questions that I get asked as an analyst is the following: Should I invest in gold? The answer to this question is a lot simpler than one might expect – it depends. For starters, it should be known that gold is a safe-haven investment during times of geopolitical uncertainty, equities weakness, or falling interest rates. At this juncture, the world is teetering on the edge of a recession, with the MSCI all country world index having plunged 20% from its high in mid-2015 as can be seen in the chart below. For those who don’t know, the MSCI all country world index is a rather broad measure – a weighted index – of equity market performance globally. It comprises a mix of emerging market stocks and developed economy stocks. So when you see the sharp declines in the MSCI ACWI index you are effectively looking at a snapshot of the overall performance of the world economy. With major averages plunging, tracking the movements of crude oil it is clear that stock market volatility is reaching a crescendo.

This is easily evidenced by looking at another one of the measures that I routinely use to gauge general trader and investor sentiment: the volatility index. The CBOE (Chicago Board Options Exchange) VIX provides the most up-to-date data on volatility indexes for major averages. There isn’t a single volatility index, there are several and one of the most important ones is the S&P 500 volatility index. As can be seen from the below chart, the volatility index has spiked by 7.04% which is in consonance with the general sentiment that we are seeing with selloffs in equity markets. The chart below reflects the sharp increase in volatility for the S&P 500 Index (SPY). As you can see, it is trading at a level of 28.14 (+1.85 points) for a gain of 7.04%. Volatility indexes such as this one are certainly nothing to cheer about, since rising indexes are often associated with plunging indices. In other words as the S&P 500 index declines, so the volatility index spikes. It is a great harbinger of trends in the market and it certainly dovetails with the economic sentiment that is being felt in the broader market.