Federal Reserve Governor Christopher Waller said on Bloomberg TV on Friday that petrol prices may rise, but this is unlikely to lead to lasting inflation. He said it would become an issue for the Fed if energy prices fall back within a few weeks or a couple of months. Waller said a longer period of higher energy prices could spread more widely through the economy. He referred to the 1970s, when energy shocks came in waves and prices did not drop back down.

Labor Market Data In Focus

He said data due that day would show whether the labour market is turning a corner. He added that January job gains were concentrated, and he expects the January jobs figure will be revised down. Waller said that a hot PCE reading and a solid jobs report would point to the Fed waiting. After his remarks, the US Dollar Index rose 0.25% on the day to 99.30. The report also noted that Eren Sengezer focuses on analysing how macroeconomic data, central bank policy, and political events affect financial assets over the short and long term. With the Federal Reserve signaling it will wait for more data, derivative traders should anticipate increased volatility. The latest Core PCE inflation reading for January 2026 came in hotter than expected at 0.4% month-over-month, pushing the annual rate back up to 3.1%. This, combined with today’s solid February jobs report showing a gain of 225,000 payrolls, supports the case for holding interest rates steady for now.

Energy Prices And Fed Policy

The recent spike in energy prices is the main wild card for the coming weeks. We have seen WTI crude oil jump over 10% in the last month to above $95 a barrel amid renewed geopolitical tensions, a move that is already filtering through to the gas pump. Traders should watch options on energy ETFs, as sustained high prices could force the Fed’s hand and change the inflation outlook from a temporary blip to a persistent problem. This uncertainty is fueling a stronger US Dollar, with the DXY index now trading firmly above 99. A hawkish Fed makes the dollar more attractive, putting pressure on other currencies and commodities priced in dollars. This suggests caution for those positioned for a weaker dollar and presents opportunities in currency futures for those betting on continued strength. Looking back, we saw significant progress on inflation throughout 2025, which led many to price in multiple rate cuts for 2026. However, the current situation feels similar to the stubborn inflation we battled back in 2022 and 2023, reminding us that the final leg of this fight can be the most difficult. This shift in expectations means options pricing on interest rate futures will likely show a lower probability of near-term rate cuts than just a few weeks ago. We also need to look closer at the labor market details, as today’s headline number may not tell the whole story. The January 2026 job gains were indeed revised down significantly, from 180,000 to 145,000, confirming that earlier strength was concentrated in just a few sectors. This underlying weakness, contrasted with a solid February report, creates conflicting signals that could lead to choppy trading in equity index futures as the market debates the true health of the economy. Create your live VT Markets account and start trading now.

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Gold is set for its first weekly fall in five weeks as rate expectations move towards hikes in Europe and just one cut from the FOMC. The shift has also been linked to reassessment of safe-haven assets. The US dollar rose 1.7% this week, its strongest weekly gain in over a year, which has added pressure to gold. Gold has also been used as a source of liquidity as holdings are sold to meet margin needs or raise cash.

Gold And Liquidity Dynamics

The oil-to-gold relationship has changed, moving from nearly 80 barrels per 1 oz of gold to 60 barrels. Rates, liquidity, and gold’s role as a risk gauge may come back into focus after the US jobs report, depending on whether the data is stronger or weaker than expected. The article was produced with the help of an AI tool and reviewed by an editor. Gold is facing its first weekly loss in five weeks as we reassess its role as a safe haven. Today’s stronger-than-expected U.S. jobs report for February, adding 250,000 jobs against a forecast of 180,000, reinforces the view that the Federal Reserve will make fewer interest rate cuts this year. This expectation of higher rates for longer makes holding non-yielding gold less appealing. The U.S. dollar’s rally is a significant headwind, with the Dollar Index (DXY) climbing 1.7% this week to trade above 105.5, its best performance in over a year. This strength is also fueled by signals of potential rate hikes in Europe, making the dollar a more attractive safe haven than gold right now. We see this weighing directly on the dollar-denominated gold price, currently struggling to hold above $2,250 an ounce.

Options And Tactical Hedging

We are also seeing gold being used as a source of cash in this shifting environment. Traders are selling gold holdings to cover margin calls in other assets or simply to raise their liquidity ahead of expected market volatility. This behavior treats gold not as a long-term store of value but as a ready source of funds. For derivative traders, this suggests that buying put options on gold futures or related ETFs is a logical strategy in the coming weeks. This approach allows us to profit from further price declines as the market continues to price out Fed rate cuts. A break below the $2,200 support level appears increasingly likely if this momentum continues. Looking back to late 2025, the market was pricing in multiple rate cuts for this year, but that sentiment has clearly reversed. The changing oil-to-gold ratio, which has moved from nearly 80 to around 60 barrels per ounce of gold, shows how risk is being repriced across different commodities. This heightened uncertainty means strategies that profit from volatility, like straddles, could be effective around the next inflation data release. Create your live VT Markets account and start trading now.

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Danske Research lifted its US GDP growth forecast for 2026 to 2.0% from 1.8%, while keeping the 2027 forecast at 1.7%. It still expects growth to cool in 2026 due to structural headwinds. It expects stagnant labour supply growth and slower wage growth to weigh on household consumption. This is expected to be partly offset by higher fixed investment.

Inflation Outlook Remains Contained

The team sees inflation staying contained, with data distortions in Q4 not changing the broad path. It expects slower housing inflation and lower unit labour cost growth to limit overall inflation, while tariff pass-through lifts goods and food prices in 2026. Headline inflation is forecast at 2.4% in 2026, down from 2.5%, and 2.4% in 2027, unchanged. Core inflation is forecast at 2.5% in 2026, down from 2.8%, and 2.6% in 2027, unchanged. It expects two 25 bps Federal Reserve rate cuts in June and September 2026, delayed from March and June. After that, it forecasts a terminal rate of 3.00% to 3.25% through the rest of 2026 and all of 2027. With our expectation for Federal Reserve rate cuts now pushed to June and September, the path forward appears less aggressive. The latest February CPI data, showing core inflation holding firm at 2.5%, supports this patient approach from the central bank. This means the market must adjust away from the more dovish outlook it held at the end of last year.

Implications For Rates Markets

This outlook suggests that short-term interest rate futures may be overstating the case for deeper cuts later in the year. The February jobs report showed wage growth cooling to 3.8% annually, reinforcing the view of a slowing, but not collapsing, economy that doesn’t require drastic Fed action. Therefore, positions that bet on a terminal rate holding around 3.00-3.25% appear well-founded for the coming weeks. Looking further out, the forecast for a steady policy rate through 2027 suggests a period of lower volatility is on the horizon. The MOVE index, which tracks bond market volatility, has already dipped below 90, a stark contrast to the levels above 120 we saw during the uncertainty of 2025. This creates potential opportunities to sell volatility on longer-dated options, anticipating a calmer interest rate environment post-September. For equity index derivatives, this environment supports range-bound strategies, such as selling iron condors on the SPX. The economy is not strong enough to break significantly higher, but the prospect of eventual cuts should provide a floor for the market. This scenario of steady growth and contained inflation is likely to keep major indices within a predictable channel. We must remain aware of the balanced risks to this outlook, particularly the potential for a sudden slowdown in consumer spending. Given this, holding some cheap, out-of-the-money puts on consumer discretionary ETFs could be a prudent hedge against a negative surprise in consumption data. Conversely, a global manufacturing boom could delay cuts, making calls on industrial sector ETFs an interesting consideration. Create your live VT Markets account and start trading now.

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Recent US labour figures and rising Middle East tensions have supported the US Dollar. Data showed stabilising jobless claims and a sharp drop in announced job cuts ahead of a key payrolls release. Challenger job cuts fell 72% year on year to 48.3k in February. The 12-month moving average eased to 93.1k.

Labor Market Signals

Initial jobless claims held steady at 213k, slightly below expectations. Hiring remained soft, but the figures pointed to a steadier labour market. Markets were focused on an employment report with consensus forecasts of a 55k rise in nonfarm payrolls. The unemployment rate was expected to stay at 4.3%. A stronger-than-expected payrolls result could reduce US growth concerns, even with elevated energy prices. A weaker reading could increase growth worries, given uncertainty in energy markets and AI-related disruption. If payrolls are strong enough, the Federal Reserve could move towards a more even policy stance, where the next move could be a cut or a hike. This would differ from a recent easing tilt and could support the Dollar.

Implications For Fed Policy

The stronger-than-expected jobs report has shifted the landscape, confirming fears of renewed US economic resilience. February nonfarm payrolls just came in at 185,000, crushing the consensus estimate of 55,000 and pushing the unemployment rate down to 4.2%. This data effectively removes immediate US growth concerns and provides a strong tailwind for the dollar. This print forces us to reconsider the Federal Reserve’s path, tilting it toward the more symmetric stance that was considered a risk. The market is now rapidly pricing out the rate cuts we had anticipated for the second half of the year, with Fed funds futures now suggesting a sub-20% chance of a cut before July. We see this as a clear signal that the Fed’s next move could just as easily be a hike as a cut, a sharp reversal from its earlier easing bias. For derivatives traders, this calls for buying volatility as the market digests the end of the Fed’s clear dovish guidance. The VIX index has already climbed from 14 to over 18 in response, and we anticipate further uncertainty in interest rate markets. We should consider long straddles or strangles on major equity indices and treasury bond ETFs to capitalize on wider price swings in the coming weeks. We should also position for continued US dollar strength through the options market. Buying call options on the U.S. Dollar Index (DXY) provides a direct, risk-defined way to benefit from further upside. This is especially attractive against currencies whose central banks, like the ECB, remain more dovish. This economic strength is occurring alongside escalating Middle East tensions, which are pushing energy prices toward levels that could complicate policy. With Brent crude now trading above $95 a barrel due to new shipping disruptions, the risk of an inflationary energy shock is rising. This reinforces the dollar’s appeal as both a high-yielding and safe-haven currency. This environment marks a significant departure from the disinflationary narrative that we saw building throughout 2025. The persistent tightness in the US labor market, a trend that re-emerged late last year, has proven more durable than most expected. We must now adjust our strategies away from the simple “Fed pivot” playbook that worked previously. Create your live VT Markets account and start trading now.

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India’s foreign exchange reserves rose to $728.49bn on 23 February, up from $723.61bn in the previous reporting period. The increase was $4.88bn over the earlier level. Looking back to early 2025, we saw India’s FX reserves show strong growth, hitting $728.49 billion by late February of that year. This set a clear tone for the market, signaling the Reserve Bank of India’s (RBI) significant capacity to manage currency fluctuations. That trend of accumulation has been a key factor throughout the past twelve months. This strength has continued, with the latest RBI data from February 2026 confirming reserves have now climbed to a new high of $802.1 billion. This massive war chest provides a strong backstop against any sudden depreciation of the Rupee. Consequently, market participants have priced in lower risk for the currency in the coming weeks. We are seeing this reflected directly in the options market, where one-month implied volatility for USD/INR is now trading near 3.8%. This is noticeably lower than the 4.5% average we saw for much of the second half of 2025. Such low volatility suggests traders do not expect major price swings in the near future. This pattern is consistent with what we observed in the 2020-2023 period when the RBI’s aggressive reserve accumulation also led to a dampening of volatility. That historical precedent supports the view that the RBI will likely continue to intervene to smooth out any sharp Rupee weakness. This makes explosive upward moves in the USD/INR pair less probable. Given this environment, traders should consider strategies that benefit from range-bound price action and low volatility. Selling out-of-the-money call options on the USD/INR pair could be an attractive way to collect premium, capitalizing on the expected stability. This approach bets on the RBI’s firepower effectively capping any significant upside in the exchange rate.

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Silver (XAG/USD) traded mostly flat around $82.80 in Europe on Friday ahead of the US Nonfarm Payrolls (NFP) release at 13:30 GMT. Traders are watching the data for clues on the Federal Reserve’s next rate moves. After February ADP private jobs beat forecasts, market pricing shifted towards steadier policy in July. CME FedWatch shows the chance of rates being held in July at 51.7%, up from 25.3% a week earlier.

Key Labor Market Expectations

The NFP report is forecast to show 59K new jobs versus 130K in January. The Unemployment Rate is expected at 4.3%, with Average Hourly Earnings seen steady at 3.7% YoY. If jobs and wages come in strong, expectations for steady rates may weigh on silver, which does not pay interest. Geopolitical tension in the Middle East involving the US, Israel, and Iran has supported demand for safer assets. Silver was near $83.21 at the time of writing, with the 20-day EMA around $84.80 and the 14-day RSI in the 40.00–60.00 range. Resistance is at $84.80 and $90.00; support is near $82.00, then $78.00, with a further drop pointing towards the mid-$70s. Given the market’s current pause around $82.80, our immediate focus is the US Nonfarm Payrolls report. The high level of uncertainty before this release suggests a spike in volatility is coming. A straddle or strangle options strategy could be effective, allowing us to profit from a significant price move in either direction without betting on which way it will go.

Fed Policy And Risk Backdrop

The Federal Reserve’s stance remains the largest headwind for silver prices, as the probability of a July rate hold has now passed 50%. We remember how the Fed held rates steady through most of 2025, and a strong jobs number today would reinforce that hawkish outlook. If the report shows payrolls well above the 59K forecast, we would consider buying put options to target the $78.00 support level. However, the escalating conflict in the Middle East is providing a solid floor under the price. Recent reports show global shipping insurance premiums rose 5% in the last month, a direct result of this tension, which boosts silver’s appeal as a safe haven. This makes outright short positions risky and suggests selling cash-secured puts with a strike price below $80.00 could be a prudent way to collect premium. We also have to consider the strong underlying industrial demand, which acts as a long-term support. The Global Solar Council’s report from last month confirmed that installations grew by 22% in 2025, a trend that heavily consumes silver. This fundamental strength means any significant price dip caused by Fed policy might be an opportunity to buy longer-dated call options with a strike near the $90.00 resistance. Technically, the price is caught in a range, with the 20-day EMA at $84.80 offering little directional guidance. This defined channel between the $82.00 floor and the $90.00 resistance area is ideal for an iron condor strategy. By selling an out-of-the-money call spread above $90.00 and an out-of-the-money put spread below $82.00, we can profit from time decay if the price remains range-bound in the coming weeks. Create your live VT Markets account and start trading now.

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Eurozone seasonally adjusted gross domestic product grew by 0.2% quarter-on-quarter in the fourth quarter. This was below the forecast of 0.3%. The result indicates growth of 0.2 percentage points less than expected for the quarter. The release compares actual output change with the market forecast for 4Q.

Eurozone Growth Slows In Fourth Quarter

The fourth-quarter GDP figure for 2025 coming in at 0.2% instead of the expected 0.3% signals a cooling Eurozone economy. This underperformance suggests the recovery we saw through the middle of last year may be losing momentum. Our immediate focus must now shift to how the European Central Bank will interpret this weakness. This data point increases the probability of an earlier ECB interest rate cut. With the latest inflation reading for February 2026 still sticky at 2.4%, this weak growth could be the trigger for the ECB to act sooner than anticipated. We should watch for buying pressure on Euribor futures, as the market begins to price in a rate cut for the second quarter instead of the third. For currency markets, the prospect of lower rates puts downward pressure on the Euro. The EUR/USD pair is likely to test lower levels, especially as the U.S. Federal Reserve has signaled a more patient approach. We should consider strategies that benefit from a falling Euro, such as buying put options targeting levels we last saw in late 2025. Slower economic growth raises concerns about corporate earnings for European companies. Stock indices like the EURO STOXX 50 may face resistance as forward-looking earnings estimates are revised downwards. This makes protective put options on the index an attractive hedging tool for the coming weeks.

Market Volatility Likely To Rise

Finally, this unexpected economic softness will likely increase market volatility. The VSTOXX index, which measures equity market volatility, has been relatively low, hovering around 14 for the past month. This GDP miss could push the index higher as uncertainty rises, making options premiums more expensive. Create your live VT Markets account and start trading now.

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The Indian Rupee traded higher against the US Dollar on Friday afternoon in India, pushing USD/INR down to near 92.00. The move followed Reserve Bank of India action in the foreign exchange market on Thursday after USD/INR hit a record 92.67 on Wednesday. Oil prices remained elevated amid the Middle East war involving the US, Israel, and Iran. WTI traded near a fresh 18-month high above $80.00 after rising on supply concerns linked to military activity near the Strait of Hormuz. India’s currency remains sensitive to oil because the country relies heavily on imports for energy. The US has allowed India to buy crude oil from Russia for one month during the Iran conflict. Foreign Institutional Investors were net sellers in all three March trading days, selling Rs. 15,800.81 crore, based on NSE data. The US Dollar traded cautiously before the US Nonfarm Payrolls release at 13:30 GMT. February payrolls were expected at 59K versus 130K in January, with unemployment seen at 4.3%. CME FedWatch showed July hold odds at 47.4%, up from 33.4% a week earlier. USD/INR stayed above its 20-day EMA near 91.43, while the 14-day RSI held above 60.00. Support levels were 91.40–91.45, then 91.00 and 90.60, with resistance at 92.67 and a possible move towards 93.00. The Indian Rupee is finding temporary relief near the 92.00 level against the US Dollar, largely because the Reserve Bank of India is selling dollars to prevent a sharper fall. However, the fundamental pressures from high oil prices and foreign investors selling Indian stocks remain intense. This tug-of-war between central bank action and market forces creates a volatile trading environment. With WTI crude oil holding firm above $80 per barrel, a level we haven’t consistently seen since late 2024, India’s import bill is rising sharply. This is spooking foreign investors, who have sold nearly Rs. 16,000 crore of Indian equities in the first three days of March alone, a stark reversal from the net buying we saw late last year. These outflows put direct downward pressure on the Rupee. Today’s US Nonfarm Payrolls report is the immediate focus, as it will heavily influence the Federal Reserve’s interest rate path. Expectations are low at 59K new jobs, so any figure significantly above that could strengthen the US Dollar and push the USD/INR pair higher. The market is already pricing in a lower chance of a Fed rate cut in July, a sentiment that strong data would solidify. Given the strong underlying upward trend for USD/INR but the risk of sudden RBI-driven pullbacks, buying call options is a sensible strategy. This approach allows us to capitalize on a potential break above the all-time high of 92.67, while our downside is limited to the premium paid if the Rupee strengthens unexpectedly. The defined risk is especially valuable ahead of a major data release. The current situation, with fundamentals pointing to Rupee weakness but the RBI actively intervening, is keeping implied volatility elevated. We saw similar conditions back in 2022 when the Rupee was under pressure, reminding us that sharp moves can happen in either direction. Traders who anticipate a big move but are unsure of the direction could consider using straddles to profit from this heightened volatility. For those already holding long USD/INR positions, it is crucial to protect profits from any sharp, RBI-induced reversals. Using the 20-day moving average near 91.43 as a key level for stop-loss orders is a practical way to manage this risk. Hedging with out-of-the-money put options can also be an effective way to stay in the trade while insuring against a sudden downturn.

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The Euro looks weak against the US dollar on a purchasing power parity basis, but it remains high on a trade-weighted basis. The trade-weighted measure can stay elevated even when EUR/USD is low because it compares the Euro with many currencies. The ECB’s trade-weighted Euro index covers 40 currencies and has softened in recent weeks, but it is still close to its all-time high on 28 January. This keeps it near the upper end of its range over the past 25 years.

Role Of Undervalued Asian Currencies

Undervalued Asian currencies can push the trade-weighted Euro higher. The Renminbi (RMB) and Taiwan Dollar (TWD) make up about 17% of the ECB’s trade-weighted basket. Because RMB and TWD are described as severely undervalued, they mechanically lift the trade-weighted Euro. The estimate given is that they make the Euro about 5% stronger than it would be if those currencies were not undervalued. Without this effect, the trade-weighted Euro would still be at the upper end of its 25-year range. It would be less strong than the current index level implies. As of March 6th, 2026, we are still dealing with the same puzzle from 2025 where the Euro appears weak against the US dollar but strong on a trade-weighted basis. This creates a confusing picture, as the headline EUR/USD rate, currently hovering around 1.0750, doesn’t tell the whole story about the Euro’s overall standing. The core of this issue remains the significant undervaluation of key Asian currencies.

Trading And Policy Implications

The Chinese Renminbi and Taiwan Dollar continue to weigh on the index, artificially inflating the Euro’s trade-weighted value. We’ve seen China’s central bank continue its policy of managed depreciation to support its exports, with industrial output figures from February 2026 showing only a modest 3.2% year-over-year increase, below expectations. This sustained weakness in Asian currencies keeps the trade-weighted Euro elevated, even as the EUR/USD pair struggles. This distortion is critical because it gives the European Central Bank policy flexibility. With the trade-weighted index still historically high, the ECB has less pressure to combat a “weak” currency, which helps them maintain a dovish stance, especially as recent Eurozone inflation cooled to 2.2% in February. We recall discussions from last year about this exact dynamic, and it appears to be guiding their inaction on rate hikes. In contrast, the US economy continues to show resilience, with the latest non-farm payroll report for February 2026 adding a solid 230,000 jobs and keeping the Federal Reserve on a much more hawkish path. This growing policy divergence between a hesitant ECB and a firm Fed is the primary driver reinforcing US dollar strength. History, such as the period from 2014-2015, shows us that such policy divergences can lead to sustained trends in currency pairs. For derivatives traders, this points towards strategies that benefit from a declining EUR/USD. Buying put options on the Euro, or establishing bearish put spreads to lower the cost, allows for positioning for further downside while capping risk. Given the policy divergence, targeting levels seen in late 2025, such as the 1.0500 handle, seems like a reasonable medium-term objective. The discrepancy also suggests that implied volatility in EUR/USD may be underpriced, as the market could be lulled by the strong trade-weighted index. Volatility-based trades, like purchasing long-dated straddles or strangles, could be effective to position for a sharp move once the market focuses solely on the diverging central bank policies. This sets up a potential break from the range-bound trading we have seen in early 2026. This environment is also ripe for relative value trades that isolate the US dollar’s strength. One could consider shorting the EUR/USD pair while simultaneously taking a long position in the Euro against a currency whose central bank is even more dovish than the ECB. This approach looks to profit from the unique strength of the dollar rather than broad weakness in the Euro itself. Create your live VT Markets account and start trading now.

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Silver rose on Friday, with XAG/USD at $84.20 per troy ounce. This was up 2.65% from $82.02 on Thursday. Since the start of the year, Silver has gained 18.45%. The price was also listed at $2.71 per gram.

Gold Silver Ratio Update

The Gold/Silver ratio was 60.64 on Friday, down from 61.90 on Thursday. The ratio measures how many ounces of Silver equal the value of one ounce of Gold. Silver prices can change due to geopolitical risk, recession fears, and shifts in interest rates. As Silver is priced in US dollars, moves in the dollar can also affect the price. Other drivers include demand, mining supply, and recycling rates. Industrial use in electronics and solar energy can lift demand, while weaker activity can reduce it. Economic conditions in the US, China, and India can affect usage and buying patterns. Silver often tracks Gold, and the Gold/Silver ratio is used to compare relative pricing between the two metals.

Market Outlook And Trading Ideas

With silver moving to $84.20, we are seeing a continuation of the strong trend from the beginning of the year. The 18.45% climb in just over two months suggests powerful momentum is at play. Traders should anticipate heightened volatility and watch key technical levels for either a breakout or consolidation. A key driver appears to be the shifting outlook on interest rates, as recent comments from the Federal Reserve in late February 2026 hinted at a potential pause in their hiking cycle. This has helped push the US Dollar Index down from around 105 in January to its current level near 101.5. A weaker dollar is often a tailwind for precious metals, making them cheaper for holders of other currencies. Industrial demand is also providing a strong fundamental support for the price. A report from the Global Solar Council last month projected a 25% increase in solar panel installations for 2026, driven by new energy policies in Europe and China. This robust demand for physical silver creates a solid price floor that investment flows are building upon. The Gold/Silver ratio falling to 60.64 is a very bullish signal, telling us that silver is currently outperforming gold. Looking back, we saw this ratio peak near 85 in mid-2025, so the current trend shows that momentum is strongly in silver’s favor. This shrinking ratio could encourage traders to favor long silver positions over gold in the coming weeks. Given this upward momentum, buying call options could be a strategy to capture further gains while managing risk. With volatility increasing, using bull call spreads might be a more cost-effective way to express a bullish view. For those anticipating a short-term pause, selling cash-secured puts below the current market price could be an effective way to collect premium. Create your live VT Markets account and start trading now.

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