Gold Prices May Exceed $4,900 Forecast Amid Surging Demand for Bullish Options
Gold prices may exceed Goldman Sachs' yearend forecast of $4,900 due to rising demand for bullish gold options, according to a note from the bank.
The surge in demand has created a 'mechanical price amplifier' that could push bullion toward key option strike levels, where dealer hedging may accelerate price moves.
Goldman said that a further pickup in Western investor demand and continued strong central bank buying could drive gold prices upward, but cautioned that this dynamic cuts both ways. As gold approaches key strike levels, dealers who sold call options may be forced to buy bullion to hedge their exposure, amplifying the rally.
However, the reverse is also true: a price pullback could trigger dealers to unwind those hedges, deepening any sell-off.