The CBOE Gold ETF Volatility Index , often referred to as the "Gold VIX," surged on Monday, gaining more than 60 percent as gold prices slumped to a two-year low below $1,400 per ounce.

The index, viewed as a proxy for investor expectations for volatility in the price of gold, ended Monday with its largest daily percentage increase in history.

The GVZ is a 30-day risk forecast of options based on the SPDR Gold Trust exchange-traded fund , which on Monday had its busiest trading day in history as spot gold ended its worst two-day selloff in 30 years.

The GVZ on Monday jumped 61.7 percent to 34.48 after hitting a new high of 35.39.

The GVZ has been hovering around the mid to low teens since July 2012. It had its largest one-day percentage gain of 39 percent on Friday, ending at 21.32. It surpassed that one-day percent price gain on Monday.

The collapse in gold prices, which began Friday, has spurred an explosion in options trading and volatility across the entire gold spectrum, including big ETFs like GLD.

Gold's fall was attributed to a number of factors, including anticipated selling from the central bank of Cyprus, but also as hedge funds and other institutions were caught off-guard by the sharp fall.

"Activity in GLD options can best be described as frenzied as gold continues to plummet," said Gareth Feighery, a founder of options education firm www.marketTamer.com.

Shares of GLD fell 8.8 percent to $131.31 with more than 93 million shares traded. Overall option volume on the fund is 4.5 times greater than the daily average with 429,000 puts and 401,000 calls traded on Monday, according to options analytics firm Trade Alert. The swiftness of gold's decline has some investors questioning whether the long bull market in the precious metal is over.

The sharp rise in the ETF's implied volatility "reflects a panic in the most widely traded precious metal in the world rather than a subtle risk adjustment," said Ophir Gottlieb, managing director of options analytics firm Livevol.

GLD options are pricing in a nearly three fold increase in risk from less than a week ago, Gottlieb said.

Using a different methodology, Livevol data show that on Monday, the 30-day implied volatility for GLD stood at 34.14 percent, a 74 percent increase in one day and up from a 12 percent volatility reading on April 9. In that same time period GLD shares have gone from $153.34 on Tuesday to touch a two-year low of $130.52 on Monday.

Among the most active options were the April $130 GLD strike put, carrying volume of more 24,500 contracts. The June $150 calls grabbed interest on a mixture of selling and buying.

As gold extended losses from Friday, related ETFS and miners also showed a sharp rise in implied volatility and volume.

For example, in the iShares Silver Trust , options volume is 4.8 times the typical levels. Increased turnover was also seen in SPDR S&P Metals and Mining ETF , ProShares UltraShort Silver fund , ProShares UltraShort Gold and Direxion Daily Gold Miners Bear 3X Shares .

"Many mining stocks were trading on Monday based solely on the movement of the underlying commodity gold rather than company specific fundamentals," Gottlieb said.

(Reporting by Doris Frankel in Chicago; Editing by Chris Reese)