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We are facing an extremely rare situation: the VIX is close to its lowest level in a year, around 14, while the price of gold is reaching historic highs. Under normal circumstances, this coexistence does not exist. Crushed equity volatility is generally accompanied by sluggish, marginal, useless gold. Today, it is exactly the opposite. This is not a statistical anomaly, but a change in regime.

The divergence will gradually emerge from 2023 onwards, with the VIX remaining subdued while gold stops correcting and breaks free from periods of calm on the equity markets.

But 2025 marks a clear break in the intensity of the phenomenon. This year, the divergence is not only continuing, it is accelerating: the VIX is sinking to one-year or even multi-year lows, while gold is setting new records. We have moved from a simple regime shift to a structural divergence between artificially compressed equity volatility and a monetary asset that is increasingly clearly incorporating the future cost of this control. As time goes by, the message becomes clearer: this is not a temporary accident, but a fundamental trend that has strengthened sharply this year.

The first key point is that the VIX no longer prices risk. It prices equity risk control. Volatility is mechanically compressed by short volatility positioning, the dominance of very short-term options, dealers' positive gamma, and a clear desire to avoid any disruption ahead of key expiries.

This means that volatility is not naturally declining because risk has disappeared, but is being artificially kept low by the very structure of the market. Many players are betting on a stable environment by selling volatility—known as short vol positions—which puts continuous downward pressure on the VIX. At the same time, the proliferation of very short-term options, sometimes limited to a single day, makes it possible to constantly adjust exposures and neutralize emerging movements almost instantly. In this context, financial intermediaries—dealers—frequently find themselves in positive gamma: it is then in their interest to buy when the market falls slightly and sell when it rises, which automatically cushions fluctuations. Finally, as key deadlines approach—earnings releases, central bank decisions, option expirations—there is a strong incentive to avoid any visible disruption, as a sudden movement could destabilize the entire system. All of these mechanisms act as an artificial stabilizer, crushing volatility without eliminating the underlying risk.

The stock market is calm not because risk has disappeared, but because it is being actively prevented from expressing itself.

Gold, meanwhile, is not looking at the VIX. It is looking at something else: monetary credibility, implicit interventions, the plumbing of the system, public debt management, and the increasingly blurred line between monetary policy and market stabilization. And in this area, the signals are clear: targeted purchases of T-bills, indirect liquidity support, postponement of sensitive macro statistics, artificially “pinned” markets.

Gold doesn't panic—it anticipates.

This divergence between the VIX and gold tells a two-speed story. On the one hand, we have a frozen stock market, hovering a few dozen points below its highs, with volatility at an all-time low. On the other, a monetary asset that already incorporates the future cost of this control. The longer volatility is suppressed, the clearer the message from gold becomes: risk has not disappeared — it has been displaced and deferred.

The most worrying aspect of this regime is that it removes the window for reaction. Historically, periods of stress built up gradually. Today, the market can go directly from calm to turmoil. Anticipating too early is destructive due to theta and IV crush.

For a non-specialist investor, this simply means that betting too early on a period of stress or a market downturn can cost money, even if you are fundamentally correct. The instruments used for this type of betting, such as options, naturally lose value over time: this is known as theta. The longer the expected movement takes to occur, the more this value erodes. On top of that, when the market remains calm, the price of these options falls further because fear subsides: this is known as the fall in implied volatility—the famous IV crush. As a result, even if the shock does eventually occur later, the position may already be significantly degraded, or even almost worthless. In other words, being right too early can be as costly as being wrong.

Waiting for the signal exposes you to a sudden movement—often in the form of a gap—with instruments that have become impractical. This is precisely what this divergence suggests: there is no longer a true price of risk between the two states.

When gold hits new highs while the VIX is down, it is not gold that is wrong. It is the stock market that is evolving under the influence of control. This type of configuration does not tell us when the break will occur, but it does tell us something essential: when it does occur, it will probably leave no one with the opportunity to enter properly.

This is not a calm market — it is a locked market.

The last time the VIX traded at comparable levels was in December 2024, in a context very similar to today's: apparent calm, a locked-down market. At the time, there were no signs of an impending crisis—indices were close to their highs, volatility was crushed, and there was a sense of total control.

However, in less than three hours, the VIX had almost doubled. This movement was triggered neither by a major macroeconomic shock nor by a clearly identifiable geopolitical event. It was primarily a mechanical break. The market was heavily positioned in short volatility, with very short-term options dominating, and dealers abruptly switched from stabilizers to amplifiers as soon as certain technical thresholds were crossed. Once these levels were broken, hedges had to be purchased urgently, triggering a self-sustaining chain reaction.

This episode perfectly illustrates the current risk: when the VIX is at such low levels, the next rise does not build gradually. It occurs abruptly, without any real window for adjustment—even in the absence of any visible “bad news.”

This type of disruption can occur in the very short term or much later, making it almost impossible to time. This is precisely why buying puts in advance is not an effective solution: the passage of time (theta) mechanically erodes their value and can render them unusable long before the shock materializes. In this type of scenario, gold stands out as a preferred hedging instrument, as it provides protection against systemic and monetary risk without suffering this gradual destruction over time.

This makes it much easier to understand gold's new all-time high at the end of this year.

This rise does not reflect visible panic or immediate stress on the equity markets, but rather a much more subtle reading of risk by investors. Faced with artificially compressed volatility, a VIX maintained at abnormally low levels, and the prospect of a disruption that is impossible to time, traditional hedging instruments become ineffective. Buying protective options too early exposes investors to a gradual erosion of their value, while waiting for the signal often means arriving too late.

In this context, physical gold stands out as an insurance policy outside the system: it does not depend on the precise timing of a shock or on the implied volatility of the equity markets. The yellow metal is thus capturing demand for long-term protection against monetary interventions, the fragility of volatility control, and the future cost of this forced stability. This record is therefore not a speculative excess, but the logical consequence of a market seeking lasting protection in an environment where risk is being pushed back, compressed, and made increasingly difficult to hedge with traditional instruments.

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