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Huge Bets That Gold Could Triple to $4,000 Trade in New York

The gold options market saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.
Bloomberg
By Bloomberg
27 Nov
0
Precious Metal Storage as Gold Gets Federal Reserve Rate Cut BoostOne kilogramm fine gold bar are pictured in the Pro Aurum KG in Munich, Germany, on Wednesday, July 10, 2019. Photographer: Michaela Handrek-Rehle/Bloomberg

Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.

“It’s like 18-month term life insurance; what will the world look like if gold is at $4,000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.

Gold futures climbed to a record $1,923.70 an ounce in 2011 as the Federal Reserve bought over $2 trillion of debt to stimulate the U.S. economy. While bullion has rallied 14% this year, the precious metal is still 24% below the current all-time high.

Block trade in options market bets futures pass the 2011 record high

The metal, which traded at $1,462.50 an ounce at 12:57 p.m. in New York, will need to almost triple to make the call options profitable for its holder.

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