Gold’s Trend Snaps – Cheap Options and Looming CTA Liquidation
New in gold
Haven't seen gold trade below the trend line that has been in place so far in 2025... nor have we seen gold trade this much below the 50 day since late 2024.
Source: LSEG Workspace
Cheap options
Gold volatility usually trades with an upside skew, i.e gold up, gold volatility up. The consolidation/correction in gold has led to gold volatility, GVZ, resetting sharply lower. Playing gold direction via options makes a lot of sense here, both if you are looking at downside hedges, as well as if you are looking for upside exposure (call spreads are priced cheaply).
Source: LSEG Workspace
The dollar connection
Despite all the negative dollar takes, the DXY remains trading not far from late April levels. If gold can't catch bids with the DXY here, what happens should the dollar catch some bids eventually?
Source: LSEG Workspace
Specs
Gold net non commercials have been in denial for months, but decided to increase the gold long just in time for the latest move lower...
Source: LSEG Workspace
Momentum chasers
CTAs are getting very close to the long unwind trigger level...
Source: BofA
Seasonality
Before you get too bearish... Gold seasonality is rather strong from July.
Source: Equity Clock
