Summary
Gold prices have shown a firm upward trend, with futures rising nearly $300 (6%) recently. This increase validates a shift in options positioning from a strong demand for puts to a renewed interest in calls, indicating a potential breakout in XAU/USD.
Despite the positive sentiment in risk reversals across various tenors, caution is advised regarding an immediate breakout to new record highs. Initial rallies may face resistance unless a stronger catalyst emerges.
Geopolitical Risk and Safe-Haven Demand
The ongoing geopolitical tensions, particularly involving the U.S. and Iran, are contributing to the demand for gold as a safe-haven asset. Analyst Matt Simpson expresses hope that a military escalation will be avoided, suggesting that the risk of conflict should keep gold prices supported, even if they experience short-term volatility.
Options Positioning Signals Further Upside
Recent analysis indicates that options positioning is becoming increasingly bullish for gold. Key risk reversals have turned positive, suggesting that demand for call options is outpacing that for puts. This shift indicates that traders are positioning for further upside in gold futures, reinforcing a constructive outlook for XAU/USD.
- 1-week 10-delta risk reversal is positive and rising.
- 1-month 10-delta risk reversal is at a two-week high.
- 1-week 25-delta risk reversal is marginally negative but close to flipping positive.
- 1-month 25-delta risk reversal is positive and at a near three-week high.
Technical Analysis of Gold Futures
The daily chart for gold futures shows a bearish outside day, which could indicate a potential pullback. A break below the 5109.5 low could signal a deeper decline. However, with risk reversals supportive and prices above key moving averages, dips may attract buyers.
The bullish bias remains intact above the 5000 level, with potential targets at 5300 and beyond. The critical question is whether the support zone between 5114 and 5144 will hold. A breakout above 5300 could lead to further gains towards 5400 and the previous swing high near 5500.