Prior to Thursday's Federal Reserve FOMC statement, economic forecast summary, and Powell's press conference, spot gold prices had been rebounding, returning to near two month highs. However, the hawkish bias of the economic forecast abstract and Powell's speech caused the US dollar to soar and precious metals to plummet. Spot gold has been suppressed below the 200 day moving average.
However, Goldman Sachs Group pointed out that beneath this surface, "we are starting to see clients re participating in gold ETF-SPDR (GLD) trading, with 440000 call options traded, the highest since March
They specifically pointed out, "We saw a client sell 75000 call option spread contracts with an expiration date in October and an exercise price of 180 or 190, buy 75000 call option spread contracts with an expiration date in November and an exercise price of 185 or 195, and sell 37000 put options with an expiration date in November and an exercise price of 175.
UBS Group also confirmed that large-scale gold trading is underway in the stock market. As shown in the figure below, the surge in gold option trading occurred before and after FOMC statements and press conferences. Basically, this indicates that someone is betting that the Federal Reserve will mess up everything.
Nicky Shiels, head of metal strategy at MKS PAMP SA, believes that Federal Reserve Chairman Powell's goal of achieving a soft landing for the world's largest economy may be overturned by the hawkish stance of the central bank. She added that this may enhance gold's safe haven status.
In addition to this sentiment, Goldman Sachs also proposed a trading suggestion: "We prefer to directly hold (gold) call options, whose 1-3 month implied volatility is close to a four-year low.
Shiels concluded in a report: "This' higher for longer 'purgatory undoubtedly poses the risk of a hard landing, making precious metals unexpectedly the only safe haven, and it seems that more than one trader is betting on this outcome
