Swissquote: Gold gains, but so does volatility

October 21, 2025

Instead, bad loan worries eased and market attention shifted to the possibility of yet another round of easing tensions between the US and China — and I found this hilarious — Trump told Fox News that his earlier threat of 100 % tariffs on China was “not sustainable”, anyway.

Consequently, the S&P 500 rose more than 1 % over the session and nearly 2 % over the past two sessions, led by a tech rally. Amazon — the company whose AWS problems caused widespread disruptions — gained 1.61 % as investors were reminded how integral AWS is to global business. Apple printed its first all-time high this year after reports emerged that iPhone 17 sales were 14 % higher than comparable launches of prior models — though this does nothing to change that Apple still lags in the AI race driving valuations elsewhere in Big Tech.

In Europe, defense stocks rebounded strongly after Friday’s dip amid Middle East risk and another unproductive meeting between Trump and Zelensky — the US Secretary Pete Hegseth wearing a tie that eerily resembled the Russian flag drew attention, underlining how awkward that meeting might have been. With ASML also up 2.66 %, the STOXX 600 approached record highs. The CAC 40 traded near its own highs despite upward pressure on borrowing costs following the S&P downgrade last Friday. In the UK, the FTSE 100 gained 0.52 %, led by defense and mining names. Energy lagged as crude continued to slip on fading geopolitical risk, with US oil consolidating below $60 per barrel. Fresnillo — one of the gold miners with a stand-out year — added 56 points to the index and is now up over 350 % year-to-date, outperforming both gold and Bitcoin.

Gold itself saw tight demand near record highs despite a risk-on environment, confirming again that the fundamental drivers behind gold have shifted. Since Trump reentered the White House, gold has rallied on both risk-on and risk-off days, and irrespective of whether US yields move up or down. Many investors now believe a $5’000/oz target for gold is plausible and might not be difficult to surpass. But there is a curious anomaly: volatility in gold is rising while the price is rising. That’s unusual — typically volatility compresses during sustained bullish trends and only spikes during panic selloffs. This divergence could suggest that risks to the gold rally are building beneath the surface. If a correction comes, history offers a cautionary precedent: in March 2022, gold’s volatility index reached similar levels, and the price of an ounce fell about 20% over the following four months. Not a guarantee of repetition, but worth keeping in mind.

In global indices, Asia posted another strong session: Korea’s KOSPI hit fresh highs and Chinese stocks recouped losses. Australia’s ASX is testing record territory this morning, as well, on news that the US and Australia have signed a deal to increase US access to Australian rare earth metals — lifting mining names there. Meanwhile, rare earth and critical metals names appear poised for further gains, aided by the West’s push to reduce dependence on China. In Japan, the Nikkei hit a fresh record today after Takaichi won a key vote to become Japan’s next Prime Minister. She will push for looser monetary policy and larger fiscal stimulus — if – of course - markets will let her. Because note that long-term Japanese yields are already near multi-decade highs, which suggests she and Abe (to whom she’s compared) do not share the same margin to maneuver.

In FX, the US dollar is slightly stronger this morning but remains under pressure from trade uncertainty, the looming US shutdown, and a dovish pivot in Federal Reserve (Fed) expectations. The USDJPY is surging on the Takaichi news: her likely softer BoJ stance suggests more convergence with the Fed, which could push the pair higher. The EURUSD is finding it hard to take further advantage of dollar weakness, as widening French-German yield spreads (amid domestic political stress in France) weigh on euro demand. Across the Channel, Cable remains under pressure, as well — but the news that British pension funds and insurers may consider regional investment opportunities probably in exchange for better conditions (which could include tax breaks and regulatory easing) offers a possible tailwind for UK assets. Don’t bet the house on it — yet.