Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low

Tyler Durden's picture

In addition to the rout in the ES, VIX and GC which we pointed out earlier, there were some additional fireworks behind the scenes in today's after hours session. The CBOE Gold Volatility Index, the ^GVZ plunged by the most in over a year, as the index hit an all time low of 15.92 without the underlying making much of a notable move. The most curious aspect of the trade was that the entire dump occured in the AH session. Many were left scratching their heads over what caused this monstrous unwind in long vol positions: was this the unwind of a massive long ES/short GC arb? We don't know, although if rumors that a major fund is planning to stand for delivery of Dec gold turn out to be true, then obviously someone got confirmation today. Keep a close eye out on the GVZ. Should this price level persist on Monday, then the front futures contract will likely surge.

A trader whom we managed to reach late in the day had this to say on this stunning move:

Typical course of action for HFT and other commodity pranksters is to shake out new contract holders.  They did it with absolute gusto today, shorting thousand of contracts into thin markets.  That didn't work.  Gold held up.  Now, taking into account that peripheral EU spreads are hitting new highs, hedge funds are getting redemption requests etc, why would you go home long ES and short GC?  So what they did is they sold ES into and after the close.  After that ES/SPY close they can't run these 'start arb' HFT strategies any more that go long S&P and short Gold as well.  Gold's closing time is 1:45pm.  They had to cover shorts. 

If the short covering in paper persists, perhaps the world won't even need the Krieger/Keiser physical PM campaign to destroy Blythe Masters.

And a bonus observation of the gold curve is the Gold February contract, where in the last minute someone bought 2k contracts, which represents 200,000 ounces or about $272MM worth of gold. Not a bad purchase for the last trade on the slowest day of the year.

As usual, we welcome our readers' perspectives on this largely unexpected move.

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Ragnarok's picture

Smells fishy, like Courtney Love's crotch.

blindman's picture

it is her amygdala that counts,  not the crotch.

Rogerwilco's picture

Did they ever find the ones belonging to the late Mr. Cobain?

Captain Courageous's picture

With the emphasis on the word "grossly." 

Tense INDIAN's picture

such high prices of Silver is depressive....should we expect some correction if the DOLLAR

surges to new highs??

In Fed We Trust's picture

The new normal. As gold approaches $1600oz I suspect $100 price intra day price swings will be common.  Standard operating procedure of any futures market. Just enough to bump all you small players out. (I'm not a player)

Arius's picture

 thats right.  although look at the casino experience; everybody knows it is fixed though many try their odds...i suppose is in your blood - you lucky you dont have it...

desgust's picture

TD,

Germany prepares a very tight cooperation with Rusia.

Ackermann (Deutsche Bank) “invites” Russia in the EMU!

„Sicher würden die Geschäft mit Öl auf den internationalen Märkten in Dollar abgewickelt, worauf Russland wenig Einfluss habe. Die russische Regierung habe aber „bestimmte Ideen“, diesen Börsenhandel auch in Russland und dann in Rubel zu organisieren. Er könne sich zudem den verstärkten Einsatz des Euro bei Abrechnungen im Energiesektor vorstellen, sagte Putin ohne konkreter zu werden.  

Even if Russia cannot decide by herself in which currency oil has to be paid, Putin has some ideas how to organise this trade in roubles. He can also see ways to use the euro more in energy trade.

Looks like preparation of the dollar demise for me. When????

The daily porn from Welt online and here the link: http://www.welt.de/wirtschaft/article11235590/Ackermann-will-Russland-in...

 

 

honestann's picture

I don't understand the meaning or significance of this event, though obviously the move today looks very different from anything previously (only up-going spikes).  Can anyone explain this in simple terms?

DoChenRollingBearing's picture

I'm with honestann.  

Although I have learned a lot about gold in recent years (and have been a fan for decades), my knowledge is very weak on paper gold trading instruments (futures, options, volatility, etc.).

Any pros who explain all this will have a grateful audience...

It does seem like all of this is coming together, no?

flacon's picture

Can you enlighten us with a non vacuous post about the meaning of this? Thought not... LOL! (just pokin' ya! We are all friends here).  Have a beer it's Friday night. 

DoChenRollingBearing's picture

Una cerveza on a Friday night.  Maybe another as well.  Flacon, have one on me!

MeTarzanUjane's picture

I dunnknow but can you homos get a room?

The original topic was about gold. My question is;

When gold crashes and goes back to is irrelevant life at $250 an oz, will Zerohedge(and other goldbug blogs) become extinct? Is the timeline-tagline directly correlated to the price of gold? Down like an elevator.

I hope not cuz Reggie will loose his platform and his brilliant marketing campaign will be revealed as a total failure.

snowball777's picture

Only if you stop showing up and posting, monkeyfucker.

doggings's picture

When gold crashes and goes back to is irrelevant life at $250 an oz, will Zerohedge(and other goldbug blogs) become extinct?

Yes probably. it should be all over by 2020 or so, but it will be $250 new dollars per oz (10k old ones) and you'll have been "extincted" long before, along with all the other paper dinosoars.

MeTarzanUjane's picture

Why do all the MIT students learn the Floyd Warshall Algo?

To deal with the downside of a gold bubble.

http://en.wikipedia.org/wiki/Floyd%E2%80%93Warshall_algorithm

snowball777's picture

Because they're "too smart" to see that they only need Dijkstra's to find an exit?

MeTarzanUjane's picture

I was hoping for Bellman–Ford from you and you disappoint me with Dijkstra.

snowball777's picture

You wanna use your chips as space heaters, that's on you; I've got better things to do with my cycles.

MeTarzanUjane's picture

Your momma! Your momma uses her cycles with Reggie! Oh snap!

snowball777's picture

My momma would snap Reggie like a twig, monkeyboy.

Tell Cheetah that he needs to get tested, m'kay?

MeTarzanUjane's picture

Yo momma needs to get tested after Reggie used her cycles, OH!

snowball777's picture

Look, GrayStroke, all I'm sayin' is you have an ethical obligation to let Cheetah know about your status, given your domestic partnership.

 

au_bayitch's picture

Then CSCO DUAL will really disappoint.

saulysw's picture

Suggestion : don't read them, then.

DoChenRollingBearing's picture

mrgneiss is the right name for you!

Long time ago Geology major Bearing here likes your earthy name.  Any rare earth metals in gneiss?

merehuman's picture

mrgneiss, only thing i learned from you is that you are an asshole. What you learned from me is that i am outspoken. Oh yea  i appropiately junked you.

breezer1's picture

i usually get the laymans view from...

http://harveyorgan.blogspot.com/

 

http://www.caseyresearch.com/gsd/

they both are daily and free.

ed and harvey and lots of other commentators are calling for a bust because of the huge shortage of physical gold and silver. maybe this will come sooner than expected.

i have stopped telling friends and family a couple of years ago about whats likely coming. yesterday at a community event several friends cornered me asking me about gold and silver. i do know that if there is a pop of even $50- $100 in gold it will have dire consequences for anyone on a fixed income support.

you have to have physical for any kind of survival scenario.

themosmitsos's picture

It was a bet on a Gold correction. People who keep expecting a massive gold correction, or the standard limit down commodity crush have no idea why Gold's at 1,350 to begin with and have missed the entire move. Gold is bullish here-it didn't do what it needed to do to imply the vaunted 1250/1160/975 correction. We're going up. We're doing 1,550. Or we're doing SPX 1000. OR BOTH. Or, if we do SPX 1,350 as some think, we'll do Gold **1,750** .... maybe higher. Hence the dump.

imo

DoChenRollingBearing's picture

Well, themos, you already partly explained this before I even arrived on this thread.  Thanks!  Monday should be interesting.

I still only want physical gold.

max2205's picture

No offense but by the time you drive to your dealer when it's crashing your dealer will buy it back at 30% off of spot and the price will have dropped 50%. Just saying nothing goes up Forever. I can hit the sell market button any time (cept over night)

themosmitsos's picture

Max this comment is mostly for the idiot below called "Logical Thought" LOL [& a lil'bit for you too]

Gold HAS gone up no matter *what* the economy's been doing [boom or bust part of cycle], for over 10yrs, and would've been doing so during the 90s too if it weren't for CB collusion to supress price.

I didn't say Gold will go up do matter what. But it is and has and will keep going up in the current environment & under current policies. In fact, fifty [&MORE], FIFTY fucking year move in USD [down] & Gold [up]. Might be a trend, but I'm not sure, I'll be sure to check with you two idiots.

What will change that? You see, a free market [relatively-WAS, in the US] is about balance primarily. So the market TRIED to correct the imbalances reprented by this continuous unidirectional move [growth, & credit] coninuously facilitated by Gov't policies since WWII: that was the crash of 2008. What did The Ben. Ber--nank [& The Green.--Span] do? They printed, like crazy, now **$4T**

Now take your Grammar School understanding of the situation somwhere else.

max2205's picture

I make a point of not eating pullback losses. My money moves. I wouldn't call you an idiot but your money might be.

jeff montanye's picture

you're good.  you can avoid pullback losses in the gold market of 2010 and not effectively lose your position in the bull market.  learned it juggling cranking chain saws did you?

logicalthought's picture

>>We're going up. We're doing 1,550. Or we're doing SPX 1000. OR BOTH. Or, if we do SPX 1,350 as some think, we'll do Gold **1,750** .... maybe higher.<<

 

Right, so you're one of those "no matter what happens, gold goes up" guys... Uh, okay, sure.

tmosley's picture

Certain conditions must be met for gold to go down on a sustainable basis.  The Fed must either totally change its policy or be abandoned, and short of a lynch mob stringing Bernanke up on a lightpost, I just don't see that happening.

LowProfile's picture

Or the USD has to do a monster, commodity-crushing, equity-eviscerating, bond-buoying, margin-calling, bear-market-short-cover-rocket-fueled-flight-to-safety-rip-your-fucking-face-right-off-and-eat-it-in-front-of-your-raw-bloody-cheek-bones rally.

THAT would do it.  In fact, at this point I'm pretty sure that's the ONLY thing that would do it.

...And then it would go right back up again.  Because as Tmosely pointed out, that's not sustainable.

Spitzer's picture

sure didn't change the medium term trend last time. Nor will it ever

dnarby's picture

Thanks for commenting here so those inclined to respond don't have to slog through a swamp of ignorant drivel to make their point.

Your understanding of gold is incomplete.

The price of gold is an expression of currency instability in whatever currency it is being priced in.  Therefore, you must look at gold in currency terms.  For instance, gold in USD has been a good bet for the last two years:

http://stockcharts.com/h-sc/ui?s=$GOLD:UUP&p=D&b=1&g=0&id=p23680168432

Gold in Sing dollars?  Not so much:

http://stockcharts.com/h-sc/ui?s=$GOLD:EWS&p=W&b=5&g=0&id=p78387525253

If you study the POG, you will find it does the worst in a stable, low inflationary environment, ~1.5-2.5%.  If you study gold production, you will find it is at 2% annually.

Therefore, if you only expand your currency at the same rate as gold is produced, your currency is... (wait for it)...

Quite literally, as good as gold!

Which is incedentally where that phrase came from.

That is the store of value thesis for gold.

Now...  If one delves into GATA, and reads, and reads, and reads, one comes up with an entrirely new possible price for gold. 

Then if one delves into FOFOA, and reads, and reads, and reads, and reads, and reads, and reads some more...  One comes up with an even more entirely new possible price for gold.

And that is the investment thesis for gold.

http://www.TheTailDoesNotWagTheDog.blogspot.com/

MeTarzanUjane's picture

"And that is the gaming thesis for gold."

tallystick's picture

It's a game or gambling when you can lose all your money. Possesion of rare metal is physical wealth.

How many people on average have died through slavery, conquest, and swindle for each ounce of gold or silver?

Each ounce of metal whether newly mined, or ancient coinage was obtained through human blood, sweat, and tears.  People gave their lives for the gold and  silver I now hold in my hand.

Have fun with your electronic digits!

ibjamming's picture

I will say one thing...throughout "civilized" history, gold has always had SOME value.  The same can't be said for a piece of paper.  If we go beyond "civilized", food and weapons, and a community working together are the only things that will matter for a while.  But, when "civilization" finally reappears, gold WILL have value again, not a piece of paper.

Saxxon's picture

Marvel not

such riches (gold mines) grow in hell; for it may be

that region best deserves the precious bane. 

                                    

                                   -- John Milton, Paradise Lost (Book I).

Zero Debt's picture

And you assume that the gold supply will increase by 2% for how long?