Gold’s Record Rally Faces Pressure as Caution Signals Mount

Gold’s blistering rally is showing signs of fatigue as traders grow cautious following a record run driven by global trade tensions.

Options activity on the SPDR Gold Shares ETF (GLD) spiked above 1.3 million contracts last week — an all-time high — but a plunge in hedging costs and a surge in implied volatility suggest cracks are emerging.

“Gold and bitcoin have shown similar ‘spot-up, vol-up’ patterns recently,” said Tanvir Sandhu, chief global derivatives strategist at Bloomberg Intelligence. Call option demand has soared, yet the asset’s sharp pullback has flattened implied volatility, indicating a more balanced risk outlook.

Gold has dropped over 6% from last week’s intraday peak amid signs of easing trade tensions. Hedge fund net-long positions on gold futures and options have also fallen to their lowest in more than a year, according to the latest CFTC data.

While gold outperformed Treasuries and U.S. equities during a tariff-fueled risk-off wave, Barclays strategists warn the rally is outpacing fundamentals. "The commodity is dislocated from its drivers like the U.S. dollar and real rates," said Stefano Pascale of Barclays, noting technicals appear overstretched.

Speculative bets have exploded post-Trump’s “Liberation Day” announcement, driving ETF call volumes and inverting the skew — another caution flag for Barclays analysts.

Garrett DeSimone of OptionMetrics sees parallels with bitcoin’s behavior, suggesting that balanced upside and downside risk could still fuel volatility in both assets.

Barclays recommends a zero-cost risk reversal trade: sell June calls and buy puts, betting on a near-term pullback.

"For the trade to pay, gold needs to come down," Pascale said.