Has gold lost its shine?
Traders on both sides of the issue are arguing in the options pit of an ETF that is trying to buck the commodity’s multi-month downtrend.
Option volumes trended bullish in both cases SPDR Gold ETF (GLD) And VanEck Gold Miners ETF (GDX) on Tuesday, as GDX posted a gain of more than 4% even as gold futures fell during the session. In GDX, bullish moves were particularly strong, with call volume outstripping put volume by more than 5 to 1 at one point in the trading day.
According to data from ThinkOrSwim, more than 10,000 calls in GDX traded at or above the ask price, meaning they were likely bought, compared to 4,400 puts that were bought. According to SpotGamma, the most popular contracts by volume were the 100 and 110 strike calls expiring on June 18. These calls require large double-digit increases from here to break even.
A separate, much larger trader in the same GDX market doesn’t think that will happen.
The biggest premium trade of the day was someone who spent more than $1 million – more than the combined premium of the 100 and 110 calls – and secured thousands of the 85-strike puts that expired on July 17.
The contrasting trades offer a perspective on the defining moment for the precious metal as geopolitics remains unpredictable and the interest rate outlook also clouds. Gold is down nearly 20% since its all-time high in January, but is still up 89% over the past two years. In comparison, gold miners recorded a 144% increase over the same period.
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Gold futures, 1 year
Traders looking for another clue might find one in options trading surrounding gold mining companies Newmont MiningAccording to Spotgamma, activity on Tuesday was nearly 100,000 contracts and nearly $500 million in options premium. Trading was noticeably bearish, with millions of call sales, including one of the biggest trades of the day, a $22 million deep call sale that is often a sign someone is exiting a stock position.
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