Gold Volatility Index Plunges after Surge of Inexplicable After Hours Selling

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pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2236
Gold Volatility Index Plunges after Surge of Inexplicable After Hours Selling

Zerohedge has an article this morning "Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low",  at http://www.zerohedge.com/article/surge-after-hours-selling-takes-gold-volatility-index-all-time-low.  Per Tyler Durden at ZH:

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.

The reason I'm posting this is that I don't know enough about gold contracts and such to interpret what this abnormal move may mean.  But large unexplained moves like this in PMs and currencies get my attention, and I sure would like to understand this better!  Any eduacted guesses from those of you here who do follow and understand these things better?

Looking at some of the comments on ZH, some of the reasons suggested for the move include that it was a bet on a gold correction, to it being a preparation towards a demise of the dollar. Thoughts?

Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Re: Gold Volatility Index Plunges after Surge of ...

This topic now has over 400 comments at Zero Hedge, I am going to go back through them to see if anything said makes sense.

I hope if you come across an sensible answer that you would post it here as well.

One way or the other, we are going to find out tomorrow...

Jager06

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2236
Re: Gold Volatility Index Plunges after Surge of ...

Thanks Jager06!  

Does anyone else here, with an understanding of gold contracts, want to take a shot at interpretting what this move may mean? 

-pinecarr

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