Gold Gives Back August Gains; Goldman Sachs Favors Cheap Upside Options Ahead of Fed Meeting
nashnova research
Gold has erased its entire mid-August rally, falling back to the 50-day moving average. Goldman Sachs argues the negatives are largely priced in and upside options look cheap heading into the Fed meeting.
Where has gold fallen to, and where is support?
The full mid-August rally has been erased; price is back to early-August levels, now testing the 50-day moving average.
Key support sits near $4,200; a larger trendline lies just below.
This means → short-term bulls lost their gains, but as long as $4,200 holds, the medium-term uptrend structure remains intact.
What is the technical signal between gold and the dollar?
Gold and the inverted DXY — the dollar index flipped upside-down to compare direction — have moved nearly in lockstep this year.
A slight bearish divergence has appeared: gold is a touch weaker than the inverted DXY suggests.
In plain terms = a weaker dollar should have pushed gold higher, but gold hasn't kept up — pointing to extra selling pressure. The gap is small, though, and not yet a trend-level warning.
How does Goldman read the short-term headwinds?
Goldman analyst Tony Kim expects near-term price action to be choppy.
Three headwinds at once: rate-hike expectations + rising energy prices + higher yields.
He notes, however, that these negatives are already substantially priced in. Institutional and sovereign bids appeared near $4,000, and the long-term case — central-bank buying and fiscal support — remains intact.
This means → the bearish factors are not new information; the real question is whether bids in the $4,000–$4,200 zone keep catching the price.
What does CTA positioning mean at this level?
Commodity Trading Advisors — trend-following hedge funds that trade on algorithms — are providing two-way convexity at the current price.
In plain terms = whether gold breaks higher or lower, CTAs will pile in and amplify the move — like a spring compressed from both ends.
This reflects a "coiling zone": once direction is confirmed, the move could be sharper than expected.
Why does Goldman say upside options are cheap?
The gold volatility index (GVZ) is relatively subdued ahead of the Fed meeting, notably lower than the VIX and the long-bond volatility index (VXTLT).
Call skew — how much extra the market pays for upside insurance — and risk reversals — the spread between call and put prices — have not priced in a large upside tail.
This means → the market hasn't really bought insurance against "gold surges," so that insurance is cheap right now.
Goldman's trade: buy cheap out-of-the-money calls before the meeting, with the gamma effect in the gold ETF (GLD) — position shifts amplifying price swings — acting as a kicker. If the Fed unexpectedly holds rates, those options stand to benefit sharply.
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