The price of Gold has hit an all-time high of almost $4,180 per ounce, even as other markets have bounced back. Demand for Gold continues to rise despite market corrections. This surge is partly due to growing worries about the US-China conflict. Recent tensions increased after China imposed sanctions on the American branches of a South Korean shipping company.

Ongoing Conflict

These sanctions are in response to US restrictions on China’s shipping industry. The conflict involves more than just trade, raising the risk of further escalation. The upcoming meeting between Presidents Trump and Xi at the APEC summit in South Korea may be influenced by these developments. In this tense situation, the demand for Gold remains high. With Gold reaching a remarkable price of nearly $4,180 an ounce, the main reason is that investors are seeking safety amid rising US-China tensions. The back-and-forth sanctions on shipping companies indicate that the demand for safe-haven assets will likely stay strong in the short term. Traders should view this as a response to geopolitical instability, not just a regular commodity rally. The uncertainty has led to a spike in implied volatility for gold options. The Gold Volatility Index (GVZ) has risen over 35% in the last month, reaching levels not seen since the global supply chain issues in early 2024. As a result, options premiums have become expensive, rewarding strategies that can handle or benefit from significant price swings.

Potential Trade Strategies

For traders expecting tensions to worsen before the APEC summit, buying call options or creating bull call spreads could help seize further gains while managing risk. A similar trend occurred during the 2019 trade disputes when Gold rose more than 20% in a few months as negotiations faltered. We’re seeing a similar pattern of investor anxiety now. On the other hand, the meeting between the two presidents at the APEC summit represents a key event risk. Any unexpected positive news or signs of decreasing tensions could quickly lead to a sell-off in Gold as investors move back into riskier assets. Therefore, holding protective put options against long futures positions is a wise way to guard against sudden reversals. Create your live VT Markets account and start trading now.

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