Summary
Gold prices have shown resilience, with a notable increase of nearly $300 (6%) in futures, indicating a shift in market sentiment. This change is attributed to a transition from extreme put demand to a renewed interest in call options, suggesting that traders are positioning for a potential breakout in XAU/USD.
Current Market Sentiment
Risk reversals have turned positive across various tenors, although caution is advised regarding an immediate breakout to new record highs. Initial rallies may face resistance unless a stronger catalyst emerges. The geopolitical landscape, particularly tensions involving the U.S. and Iran, is contributing to safe-haven demand for gold, which is expected to provide support for prices despite potential volatility.
Options Positioning Analysis
The recent shift in options positioning indicates a bullish outlook for gold. Key risk reversals have turned positive, with demand for call options exceeding that for puts. This trend is seen as a signal for further upside potential in gold futures, reinforcing a constructive bias for XAU/USD as long as support levels hold.
- 1-week 10-delta risk reversal is positive and rising.
- 1-month 10-delta risk reversal is positive and at a two-week high.
- 1-week 25-delta risk reversal remains slightly negative but is close to flipping positive.
- 1-month 25-delta risk reversal is positive and has reached a near three-week high.
Technical Analysis
The daily chart for gold futures indicates a bearish outside day, which could signal a potential pullback. A break below the 5114–5144 support zone may lead to a deeper correction. However, the overall structure remains bullish as long as prices stay above the 10- and 20-day EMAs. The outlook remains positive above the 5000 mark, with potential targets at 5300 and beyond, contingent on avoiding military escalation from the U.S.
Conclusion
While the outlook for gold remains bullish, immediate price action may be choppy. The market is closely watching geopolitical developments, which could serve as a catalyst for price movements. Traders should remain vigilant as the situation evolves.