Gold Price Outlook: Are Options Traders Front-Running a Breakout?

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.

View related analysis:

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

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.