Options market warns of a bearish reversal, is the gold bull market myth cracking?

This month, the rising trend of gold surpasses various major asset classes - even being compared to Bitcoin by some investors - as safe-haven funds continue to pour into the gold market with Trump reshaping the global economic order through tariff wars. However, the changes in options positions are causing some market observers to remain vigilant. With spot gold prices hitting a historic high last week, the trading volume of options contracts for the gold ETF-SPDR (GLD.US) broke through 1.3 million, setting a new record. At the same time, the hedging cost of put options for this ETF remains at its lowest level since August last year, while implied volatility surges, creating an abnormal market situation. Tanvir Sandhu, Chief Global Derivatives Strategist at Bloomberg Intelligence, said: "Gold and Bitcoin have recently shown the characteristic of synchronous increase in spot prices and volatility, similar to the performance of the 'Big Seven' tech stocks in recent years." He added that the demand for bullish gold options has surged, and the recent pullback in gold prices has made the distribution of implied volatility of various strike prices more balanced. The latest data shows that as some trade tensions show signs of easing, gold prices have dropped more than 5% from last week's intraday high. Data from the U.S. Commodity Futures Trading Commission shows that hedge fund managers have reduced their net long positions in gold futures and options to the lowest level in over a year. The safe-haven frenzy triggered by tariff policies this month, with the theme of "the end of American exceptionalism," has driven gold performance far beyond other asset classes such as government bonds and U.S. stocks. However, Barclays strategists believe that the current gold price has deviated from fundamental support. They pointed out in a report last week that recent monthly data on central banks' continued gold purchases is not abnormal compared to long-term trends. Stefano Pascale of Barclays PLC Sponsored ADR pointed out that the surge in gold prices has triggered a lot of speculative activity, with a sharp increase in bullish options trading for gold ETFs after Trump's "liberation day" remarks, causing the skew index to invert. With hedge funds reducing their positions and gold prices recently pulling back, strategists believe caution is needed at least in the short term. Pascale said in an interview, "We believe gold prices will decline." He added that gold prices are disconnected from fundamental driving factors such as the U.S. dollar exchange rate and real interest rates, and that technical indicators are showing signs of being overbought. Garrett DeSimone, Director of Quantitative Analysis at OptionMetrics, believes that there are similarities between gold and Bitcoin. In his opinion, as long as the implied volatility and skew index remain within the long-term historical range, both assets could continue to rise. "In terms of the options market, the possibilities of rising and falling are roughly equal," he said. Although Barclays' proprietary indicators show a bullish sentiment towards gold in the market, their strategists recommend constructing a zero-cost risk reversal portfolio by selling June call options and buying put options. Pascale said, "Obviously, this trading strategy is mainly based on directional judgment, so for this strategy to work, the gold price must fall."