Gold Options Positioning Signals Potential Breakout in XAU/USD
My observation that options positioning was signalling a potential inflection point for gold prices has played out well. Gold futures have since risen just under $300 (6%), validating the shift in skew from extreme put demand to renewed call interest.
While risk reversals have flipped positive across several tenors, I remain cautious about an immediate breakout to fresh record highs. Rallies may initially stall near resistance unless a stronger catalyst emerges.
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Geopolitical Risk and Safe-Haven Demand Supporting Gold
That said, I remain hopeful that President Trump won’t quite pull the trigger, so to speak, and that a last-minute deal – which he is clearly vying for – is reached. One does not typically provide 10 days’ notice if the intention was to attack all along. And if it were simply a case of ‘going in’, Venezuela style, it likely would have happened already.
Still, the risk of military escalation should be enough to keep gold supported, even if price action in XAU/USD remains choppy in the near term.
Gold Futures (GC) Technical Analysis
Options Positioning Signals Further Upside for Gold Prices
Sticking with options exposure, the outlook is improving for gold bulls. Last week I noted that risk reversals were at their most negative level since December 2024 — with put demand far outstripping call demand — which incidentally marked the beginning of gold’s rally from around $2,700.
Now, however, key risk reversals are turning higher alongside the gold price. Three of the four listed tenors have flipped positive, signalling that demand for calls now exceeds demand for puts — and is still building.
This shift in options positioning suggests traders are increasingly positioning for further upside in gold futures (GC), reinforcing the broader constructive bias for XAU/USD while support levels hold.
Gold Risk Reversals: What Options Positioning Is Signalling
- 1-week 10-delta (proxy for tail risk and event risk) is now positive and rising.
- 1-month 10-delta (crash protection vs upside convexity) is positive and at a two-week high.
- 1-week 25-delta (cleaner gauge of short-term bullish vs bearish sentiment) remains marginally negative but is on the cusp of flipping positive.
- 1-month 25-delta (institutional bias over the next month) is positive and has risen to a near three-week high.
Source: COMEX, LSEG
Gold Price Technical Analysis: Pullback Within a Bullish Structure
The gold futures daily chart shows a bearish outside day on Tuesday, which could also form part of a two-bar bearish reversal (dark cloud cover). A break of the 5109.5 low pushes the gold price beneath the January VPOC and warns of a deeper near-term pullback.
However, with risk reversals broadly supportive and gold prices still tracking above the 10- and 20-day EMAs, dips may continue to attract buyers. The broader structure for XAU/USD remains constructive while momentum holds above key moving averages.
My bias remains bullish above 5000, with scope for bulls to have another attempt at 5300. The key question today is whether the 5114–5144 support zone holds. A break above 5300 would bring the 5400 handle and the prior swing high just below 5500 into focus.
That said, unless the US escalates militarily, gold’s rally may remain capped in the near term — making a sustained move towards 5500 less likely for now.
Source: COMEX, TradingView
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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