The most interesting tradable volatility index in 2013 has to be the CBOE Gold ETF Volatility Index (GVZ – 19.84). GVZ pricing is based on listed option trading on the SPDR Gold Shares ETF (GLD – 116.74). The GLD exchange traded fund is one of the best methods for investors to get exposure to changes in the price of gold. 2013 has been quite a year for gold traders and GLD is down just over 25%.
As GLD broke through various support levels and made new 2013 lows the GVZ index would spike higher. In fact, at times the price action in GVZ would anticipate a new downside move. This is why GVZ and GLD have my attention right now. GLD has been testing a pretty significant support level in the 114 – 115 level. The red line on the weekly GLD chart illustrates this support level. What catches my eye is how low GVZ is despite support being tested by GLD. Note that GVZ was close to 32 back in late June when GLD traded down to this level. Today (December 26th) GVZ closed at 19.84. I am aware that volatility indexes are low due to holidays and the time of year, but below 20.00 is pretty startling. The January GVZ future settled today at 20.55 so that contract is not showing any signs of nervousness regarding a break of support.
The point – GLD continues to trade above support and the gold volatility market seems to be indicating that market expectations are for that GLD support level to hold.