Gold Skew Shifts Towards Upside Bets Amid Strong Inflows

Gold prices have seen a surge in options investors' bets on further upside, according to quantitative trading firm Susquehanna. One of the key indicators is the shift in 'skew', which measures demand for options at various price points. Chris Murphy, co-head of derivatives strategy at Susquehanna, noted that gold skew has shifted away from downside puts and toward upside calls, reversing the earlier summer setup when put protection was relatively richer.

The firm observed a recent trade where 8,000 November 460 calls on the SPDR Gold Trust were bought for about $5.55. The exchange-traded fund closed at $405.49 on Monday. This change in skew has already shown up in recent flow, with a purchase of roughly 25,000 Sep. 350 puts for $0.62 taking advantage of cheaper downside protection.

The backdrop is also being supported by flows, with gold funds seeing their strongest inflows since January. Spot gold was up 0.3% to $4,428.43 per ounce, while U.S. gold futures for December delivery edged 0.2% higher to settle at $4,482.40.