Gold Bulls Ditch Plain Calls for More Sophisticated Structures
Gold prices have surged over 10% in August, making it one of the biggest monthly gains since January. However, investors are no longer simply buying call options; they're pivoting towards more complex structures like call spreads and exotic options to position for further upside.
The shift is partly due to U.S. Treasury Secretary Scott Bessent's plan to increase purchases of 10- to 30-year U.S. Treasuries, which has put downward pressure on the dollar and lifted gold prices. As investors grow concerned about the erosion of dollar purchasing power, demand for hard assets like gold has rekindled.
Aakash Doshi, global head of gold and metals strategy at State Street Global Advisors, believes the 'currency debasement trade' never disappeared, but merely paused. He notes that gold option implied volatility remains below first-quarter levels, indicating a more orderly price action in August compared to January's 'volatility melt-up'.
Investors are using exotic options like dual-digital structures to bet on higher gold prices while reducing the cost of their trades. Combination trades involving gold and currency pairs have also become popular, with some clients requesting trades structured so that both the gold price and the dollar-Swiss franc exchange rate must be within specific ranges.