When CBOE Gold ETF Volatility Index (GVZ-24.44) futures and options were first listed I was on the floor of the CBOE using a quote machine. A trader walked by and made the comment that people would not have an interest in GVZ because it is, “just going to do the same thing that VIX does”. GVZ has proved this statement wrong several times and this was one of those weeks.
The SPDR Gold Shares (GLD – 134.62) traded in the narrowest weekly range since July this past week. Also, GLD was down 0.21% on the week. This is the smallest week over week change of the summer. However, despite the appearance of not too much volatility gold volatility rose last week by 8.00%. It appears to me that this is anticipation for heightened near term price action in GLD based on potential military intervention in Syria. Also, this is not the first case of GVZ being a little more anticipatory than VIX is relative to the S&P 500.
The same sort of price action showed up in the CBOE Crude Oil ETF Volatility Index (OVX – 28.10) which rose almost 24% from 22.70 to 28.10 last week. This was the biggest five day gain for OVX since oil volatility was up in sympathy with gold volatility in the middle of April this year. The rise was as much anticipatory as reactionary. The United States Oil Fund (USO – 38.48) did rise 1.4% and there was a lot of geopolitically motivated oil trading last week which contributed to the dramatic OVX rise. However, there is the forward looking anticipation of more oil price moves to come until the current crisis subsides. Finally note that the front month OVX futures are not at too much of a discount to OVX. If the markets expected a quick resolution to problems in Syria the September future would be more than just 0.35 lower than OVX.