Investors are more cautious in this round of gold price increases than at the beginning of the year.

Investors are more cautious in this round of gold price increases than at the beginning of the year.

Gold prices rose by about 10% in August, on track for their biggest monthly gain since January. However, compared to the frenzy at the beginning of the year, the derivatives market is noticeably calmer this time. According to a recent Bloomberg report, investors are no longer simply buying call options, but are instead turning to spread strategies and exotic options to bet on gold prices continuing to rise at a lower cost.

The catalyst for this rally was U.S. Treasury Secretary Bessant's announcement of plans to "at least double" purchases of 10- to 30-year Treasury bonds. This move depressed the dollar and boosted gold and its digital alternative, Bitcoin. Investor demand for hard assets has clearly increased against the backdrop of the dollar's continued erosion of purchasing power.

However, Federal Reserve Chairman Warsh reiterated his anti-inflation stance at the Jackson Hole symposium, fueling market expectations of interest rate hikes. Gold prices retreated on Friday, putting the brakes on this rally.

The betting strategy has changed: from "directly betting on price increases" to "careful calculation."

Compared to the beginning of the year, investors have become more conservative in their confidence in gold.

At the beginning of the year, Trump publicly stated that he was not worried about the depreciation of the dollar, which ignited a surge in gold prices. At that time, the derivatives market was highly euphoric, a period known in the industry as "Volmageddon" in the precious metals sector.

This time is different. According to Bloomberg, traders are buying large amounts of call spread options on the SPDR Gold ETF, rather than directly buying call options; exotic options are also in high demand. What they have in common is that they are lower cost and offer more restrained expectations of upside potential.

“Investors are going long on gold again through ETF demand and the derivatives market,” said Aakash Doshi, global head of gold and metals strategy at State Street Investment Management. “Currency devaluation trading never died, it just paused, and now it’s making a comeback.”

He also pointed out: "The market trend in August was far more orderly than the price fluctuations and derivatives activities in the precious metals market in January this year."

Volatility is low, and the expected range is narrow.

While implied volatility for gold options has increased, it remains well below its first-quarter high. The premium (skewness) for call options is also narrower than at the beginning of the year.

According to reports, Neeraj Chaudhary, Head of Exotic Options and Flow Trading for Europe, Middle East and Africa and Co-Head of Global Hybrid Trading at Bank of America, said: "Unlike at the beginning of the year, gold volatility is relatively low, and some investors believe that the next wave of gains is more limited. Gold prices may remain range-bound, for example, between $4,900 and $5,300."

In practice, unusual structures such as dual-digital options are quite popular. Chaudhary explains that combining gold with currency pairs is a popular strategy—using the forex side to reduce option costs.

“For example, some investors trade the gold/dollar/yen pair – you can buy it with a correlation close to negative 20% when gold and the dollar are rising,” he said.

He added, "We've also seen some demand for ternary binary options—for example, betting on gold, crude oil, and forex simultaneously, which can give investors leverage returns that are typically 10 to 20 times higher."

Joseph Khouri, Head of Equity Derivatives Structure for Europe, Middle East and Africa at Bank of America, said: "Gold dual-digit options have been the dominant trading flow over the past few months, with gold typically serving as the call option across portfolios. This is because the investment logic for gold does not depend on a single macroeconomic outcome; gold can rise in a variety of scenarios."

Bitcoin surged in tandem, but its nature remains questionable.

Gold is not the only asset to benefit from a weak dollar. Bitcoin has surged 12% since August 19, briefly breaking through $80,000 and ending months of sideways trading.

According to Coinglass data, between August 19 and 21, over $2.5 billion in short Bitcoin positions were forcibly liquidated in the perpetual contract market. This short squeeze amplified an initial macro-driven rally into a more dramatic breakout, while also drawing funds back into US-listed spot Bitcoin funds—which have attracted over $2 billion in inflows since August 19.

However, a core question remains in the market: Is Bitcoin being used as a long-term macro hedge like gold, or is this merely a leveraged and momentum-driven market rally? As short covering and profit-taking begin, the next phase of the market's movement may depend more on whether new spot demand can continue to follow, rather than on passive forced buying.

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