Gold prices are elevated above $5,000, maintaining a positive correlation with equities due to a weaker Dollar. Attempts at diplomatic resolutions involving the Iran-U.S. discussions and hopes for a Ukraine deal in March are reducing risk premiums in precious metals and energy markets.
This relative geopolitical stability is contributing to contained market volatility and encouraging further equity investments. The sustained demand for alternatives and the strategic placement of cash in the market continue to drive momentum trades.
Geopolitical Risk Premium
We are seeing the geopolitical risk premium in gold quickly evaporating as talks between the U.S. and Iran progress. The Global Geopolitical Risk Index just hit an 18-month low of 85, a steep drop from its peak of 150 during the naval skirmishes in late 2025. This suggests gold’s recent climb above $5,000 lacks the fear-based support it had last year.
This calm is being reflected directly in market volatility, which presents clear opportunities for income generation. The VIX has remained stubbornly below 15 for the past three weeks, and the CBOE Gold Volatility Index (GVZ) is similarly compressed, trading near its 2025 lows. Selling out-of-the-money calls on gold futures or the GLD ETF for the upcoming March expiration could be a prudent way to capitalize on this expected stability.
With the dollar index continuing its slide below 98.00, conditions are favorable for US equities to press higher. We saw a reported $25 billion flow into broad equity funds last week, according to EPFR Global data, showing that sidelined cash is finally being put to work. This momentum suggests that buying near-term calls on the S&P 500 is a viable strategy to ride the current wave.
Correlation Between Gold and Nasdaq 100
The positive correlation between gold and the Nasdaq 100, which has held above 0.6 for most of the last quarter, is historically unusual. Looking back at the post-inflationary period of 2024, this relationship broke down sharply once central bank policy became clear. We may be positioned for a similar divergence, where equities continue to climb on economic optimism while gold falters without geopolitical catalysts.
