Gold bulls are getting smarter: Instead of directly betting on price increases, they're turning to exotic options to prepare for the next market cycle

As the U.S. Treasury seeks to lower government borrowing costs, gold bulls are changing the way they place their bets. Investors are no longer simply buying call options, but are increasingly using lower-cost strategies such as call spreads and exotic options to position for further rises in gold prices.

U.S. Treasury Secretary Scott Bessent plans to “at least double” purchases of U.S. Treasury bonds with maturities of 10 to 30 years, a policy move that puts pressure on the dollar while boosting gold. As fears mount over the persistent erosion of the dollar’s purchasing power, demand for hard assets is heating up again.

Spot gold rose more than 10% in August, poised for the biggest monthly gain since January. Even after Federal Reserve Chairman Kevin Warsh intensified his anti-inflation stance last Friday, causing gold prices to pull back, it did not reverse gold’s strong monthly performance.

Aakash Doshi, global head of gold and metals strategy at State Street Global Advisors, said, investors are rebuilding long gold positions through underlying demand in ETF and the derivatives market. He believes that the “currency depreciation trade” never went away, it was just paused temporarily, and is now coming back to life as September approaches.

Gold is Still Rising, but Trading Styles Have Changed

Compared to earlier in the year, current bullish sentiment on gold among investors has moderated. At the start of this year, U.S. President Trump stated he was not concerned about dollar weakness, which had fueled a rally in gold.

Now, traders prefer to buy call spreads on SPDR Gold Shares ETF instead of outright call options. Exotic options are also in favor. Both strategies allow for bullish bets on gold at a lower cost.

Doshi pointed out that compared to the “volatility doom” observed in precious metals markets in January, the August gold prices have been much more orderly. Although the implied volatility of gold options has picked up, it remains below Q1 levels, and the premium paid for call options (the skew) is narrower than it was then.

Neeraj Chaudhary, head of EMEA exotic options and flow trading and global co-head of hybrid trading at Bank of America, said, gold volatility is lower than at the start of the year, so some investors see limited upside in the next rally—expecting gold to stay in a range, such as $4,900 to $5,300.

Investors are also betting on gold upside using exotic options such as dual-digital (double shark fin) structures. By setting specific conditions in the trade, these structures can further reduce the cost of bullish gold options.

Combining gold and currency pairs in trades has also become a popular choice. Chaudhary said investors can use the FX side to reduce the cost of gold options, for example, by buying about -20% correlation, which achieves a dual long position in both gold and the dollar.

He also noted some clients are requesting trades so that, upon expiration, both the gold price and the USD/CHF exchange rate must be within a specified range. There have also been quotes for triple binaries, for example, going long gold, crude oil, and forex at once. The potential leverage on returns with such structures can even exceed the 10–20x that investors typically seek.

At the Jackson Hole global central banking annual meeting, Warsh reiterated his commitment to fighting inflation and reinforced market expectations for rate hikes, cooling the surge in precious metals in the latter part of the week. However, Joseph Khouri, head of EMEA equity derivatives structuring at Bank of America, said, long gold trades remain a key focus for the market.

Khouri pointed out that in recent months, the dual-digital (double shark fin) option on gold has been the dominant trade flow, with gold typically serving as the bullish component in cross-asset portfolios. The reason is that gold’s rally logic does not rely on a single macro outcome—“there are multiple scenarios where gold prices could rise.”