Gold Prices and Geopolitical Tensions

France’s stock futures have stayed steady after a confidence vote resulted in the dismissal of the Prime Minister. Even with this political change, the euro’s value rose slightly. Recent political shifts in both Japan and France haven’t made much difference to the yen or the euro. With global instability on the rise, safe options in currency markets are limited. Gold prices are reaching new highs due to ongoing uncertainties. This trend highlights how global geopolitical tensions and U.S. tariff policies continue to have an influence. The situation in France, with the Prime Minister losing a confidence vote, isn’t our main concern. The market’s calm response—CAC 40 futures remain stable and the euro has only slightly moved—indicates that traders are looking elsewhere. This hints that selling short-term volatility through options on the French index could be a smart strategy since this kind of instability has become the norm. Over the past few years, we’ve seen that markets tend to ignore leadership changes that don’t quickly affect economic policy. With the UK and US facing their own political issues, there’s no clear “safe haven” from governance problems. This widespread uncertainty has already been reflected in pricing, making individual events like this less significant.

Focus on Washington and Trade Policy

The key focus is on Washington and the ongoing tariff situation. Recent threats of a potential 15% tariff on European car parts pose a greater risk to the European economy than a new Prime Minister in Paris. This issue is what will likely drive market movements in the upcoming weeks, not the internal politics of an EU country. Therefore, our strategy should focus on volatility coming from U.S. trade policy, rather than French politics. We should consider long-dated put options on European car manufacturer stocks or on indices with high industrial exposure, like Germany’s DAX. Currency traders might explore options strategies on EUR/USD that benefit from possible volatility spikes, as this currency pair is sensitive to any tariff announcements. At the same time, gold prices keep climbing, recently surpassing $2,600 per ounce for the first time. This reflects a strong desire for assets outside the political system. Using call options on gold futures or related ETFs is an easy way to gain from this trend while also limiting our risk. Create your live VT Markets account and start trading now.

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