The Chicago Board Options Exchange Volatility Index jumped 32 percent to 14.54 for the biggest increase since April 2013. The SPDR Gold Shares added 1.7 percent. Bullish contracts on the exchange-traded fund cost the most since December 2012 relative to bearish ones, data compiled by Bloomberg show.

Investor fled riskier assets after Malaysian Airlines jet went down over eastern Ukraine, killing all 295 people on board, in an attack that the government in Kiev blamed on pro-Russian rebels. Losses were extended after reports that Israel began a ground operation in the Gaza Strip.

“This sparked equity selling driven by fear,” said Jeff Sica, who oversees more than $1 billion as chief investment officer of Sica Wealth Management LLC in Morristown, New Jersey. “Gold prices will continue to rise due to geopolitical uncertainties.”

The S&P 500 slid 1.2 percent to 1,958.12 yesterday. Before then, the gauge hadn’t risen or fallen 1 percent on a closing basis for 62 days, the longest streak since 1995.

Gold Back

After falling last year by the most since 1981, gold is coming back in favor. The SPDR Gold Shares, which counts billionaire John Paulson as its largest holder, has gained 7.7 percent this year.

Equities dropped also after the U.S. and the European Union imposed sanctions on Russian banks, energy companies and defense firms in the latest attempt to pressure the country to end support for Ukrainian rebels. President Vladimir Putin has repeatedly denied Russian involvement in the fighting.

Investors are becoming more anxious about equities. Sixty-one percent of respondents in a Bloomberg Global Poll said the U.S. stock market is on the verge of a bubble or already in one. Most expect stock swings to increase within the next six months, according to the quarterly survey of 562 investors, analysts and traders who are Bloomberg subscribers.

The S&P 500 trades at 16.5 times the estimated profits of its members, compared with the five-year average of 14.3, according to data compiled by Bloomberg.

Bullish Wagers

Calls betting on a 5 percent rally in the gold ETF in three months cost 0.07 point more than puts pricing in a 5 percent decline as of July 3, data compiled by Bloomberg showed. It was the first time since December 2012 calls cost more than puts.

Nine out of the 10 most-owned options on the fund were bullish. Wagers calling for a gain to $130 by December had the biggest ownership, followed by calls betting on $128 by August, the data show.

The number of bullish options outstanding reached 1.73 million on July 16, more than double the number of puts, according to data compiled by Bloomberg. The ratio was at its highest since March 2013 on July 9.

When inflation increases and the Fed starts to raise interest rates, investors will dump gold and buy assets offering better returns, said Pierre Mouton, who helps oversee $8 billion at Notz, Stucki & Cie. in Geneva.

Not Positive

“Barring any specific geopolitical event, I’m not so positive on gold,” Mouton said. “Interest rates will gradually climb in the U.S. and that will be detrimental to gold. If interest rates go up, then you get paid for holding risk-free assets like Treasuries, whereas there’s no guarantee you’ll get paid for holding gold.”

A Citigroup Inc. report on June 24 estimated that gold will yield a return of 2.3 percent by the middle of next year, compared with 6.6 percent for the S&P 500 and 16 percent for the Stoxx Europe 600 Index.

Investors are returning to gold after pulling more than $25 billion out of the ETF last year, data compiled by Bloomberg show. They have invested almost $750 million in the three weeks through July 11.

The Chicago Board Options Exchange Gold ETF Volatility Index rose 5.8 percent to 15.52 Thursday. Europe’s VStoxx Index jumped 19 percent to 17.65.

“Buying gold works well as a short-term hedge against geopolitical risks,” Kevin Caron, who helps oversee $170 billion at Stifel Nicolaus & Co. in Florham Park, New Jersey, said in a phone interview. “In the longer term, the Fed’s monetary policy has had a bigger impact on gold prices.”