It turns out that all that glitters is not gold.
Sales of precious metals continue to deteriorate. GLD ETF It is now down 25% from the intraday record in February. The fund’s options trade quickly turned bearish and is now pointing to further downside.
Even after Wednesday’s further 3% decline, traders sold more calls than bought calls, with $130 million of the $200 million in option premium traded tied to puts, according to data from ThinkOrSwim and SpotGamma. Eight of the top 10 traded contracts were puts, with more than half of the put premiums trading above the ask, meaning most of the contracts were bought.
The most popular put contract on GLD by volume is currently an in-the-money 380 strike that expires today. The second most popular is the 240 strike expiring in June 2028, priced at $11.50 per contract, and is a very bearish bet that gold prices will fall another 40% over the next two years.
SPDR Gold Share, GLD
“Turkey’s central bank is selling gold and buying dollars to support the lira. The Gulf states (Qatar, UAE, Saudi Arabia) are also selling gold because they need to fund their wars,” Arora Report founder Nigam Arora said by phone. “At the same time, India raised tariffs on gold. Anyone who was just looking at the chart could see that India was stuck below $4,400, and once it broke through that level they had to start selling.”
The message from gold miners may be more hopeful.
On GDX, calls outnumbered puts by more than 2-to-1 in volume on Wednesday, with calls being bought three times as many as puts. The fund’s biggest trade of the day was a person who sold 2,000 at-the-money puts and calls expiring in December 2028, resulting in a roughly $8 million short straddle position that would win if GDX stays between about $35 and $115 by the deadline.
“Gold miners didn’t see gold prices rise to the level they should have, even though they were above $5,000,” Arora said. “If you’re interested in precious metals, GDX is a better value because the returns are great when the average cost is around $1,500.”
