Based on where the CBOE Gold Volatility Index settled on Thursday the past two days should never have happened. However, the market does not always get it ‘right’ and GVZ at 15.29 late Thursday was an indication that the relative calm that has been the gold market for 2013 was going to continue. We all now know that the market got it wrong.
From Thursday to today the SPDR Gold Trust (GLD) has dropped from 151.05 to 131.31 or a drop of about 13%. Over the same period the CBOE Gold ETF Volatility Index (GVZ) has risen from 15.29 to 34.48 for a gain of 125%. The futures have been fairly strong as well. The front month April contract, which trades for one more day, gained 107% over the same time period. As shown on the graphic below two trading days ago the curve was pretty flat. In just two days that shape has changed tremendously.
Finally, GVZ trading experienced record volume with 1488 contracts trading. The back months actually experienced highest volume with June and July futures trading 500 contracts each.