Gold tops all asset classes this month– even compared to Bitcoin by some investors: As Trump's Tariff War Reshapes Global Economic Order, Driving Safe-Haven Flows into Gold. However, Shifts in Options Positioning Are Raising Caution Among Market Observers.

As spot gold hit a record high last week, trading volume in options contracts for the SPDR Gold Trust ETF (GLD.US) surged past 1.3 million, setting a new all-time record. Meanwhile, the cost of put hedging for the ETF remains at its lowest since August last year, while implied volatility has spiked sharply, creating an unusual market pattern.

Tanvir Sandhu, Chief Global Derivatives Strategist at Bloomberg Intelligence, noted: "Gold and bitcoin have exhibited spot-up, vol-up dynamics, similar to Mag 7 in recent years," He added that demand for gold call options has surged, while the recent pullback in gold prices has led to a more balanced distribution of implied volatility across strike prices.

Latest data shows that gold has retreated more than 5% from last week's intraday highs as some signs of easing trade tensions emerged. According to the U.S. Commodity Futures Trading Commission (CFTC), hedge funds have cut their net long positions in gold futures and options to the lowest level in over a year.

This month's risk-off wave, driven by tariff policies and the theme of "the end of American exceptionalism," has propelled gold to outperform other asset classes, including Treasuries and U.S. equities.

However, barclays strategists argue that current gold prices have detached from fundamental support. In a report last week, they noted that recent monthly central bank gold purchases show no deviation from long-term trends.

Stefano Pascale of Barclays pointed out that the gold rally has triggered heavy speculative activity, with a surge in call option trading for gold ETFs following Trump's "Liberation Day" remarks, causing the skew index to invert. Combined with hedge fund position reductions and the recent gold pullback, strategists believe caution is warranted, at least in the near term.

Pascale expects gold prices to pull back, and he added that current prices are disconnected from "key drivers" such as the U.S. dollar and real rates, and "technical indicators are starting to show overbought conditions."

Garrett DeSimone, Head of Quantitative Analysis at OptionMetrics, sees similarities between gold and Bitcoin. In his view, as long as implied volatility and skew remain within long-term historical ranges, both assets could extend their rallies.

"From the options market perspective, upside and downside weights are pretty even," he said.

Although Barclays' proprietary indicators still show bullish sentiment toward gold, its strategists recommend constructing a zero-cost risk reversal strategy by selling June call options and buying puts.

Pascale noted: "Obviously, the trade is mostly directional, so for this trade to really work gold has to come down."