In the European morning session on 10 September 2025, gold remained positive, rising by 0.7% to $3,650.03. The US dollar showed resilience, suggesting market stability, while geopolitical tensions gained attention due to drones from Russia crossing Poland’s border.
The European Union President called for more sanctions on Russia, as the US-EU trade agreement was praised. US mortgage applications saw a rise of 9.2% compared to a previous drop of 1.2%. In market movements, the Australian dollar led, while the Canadian dollar lagged. European equities increased, with S&P 500 futures up by 0.4%.
Gold And Market Trends
US 10-year yields experienced a slight increase, while WTI crude oil and Bitcoin saw rises of 0.9% and 0.7%, respectively. The session was calm with stable major currencies and little movement in EUR/USD and USD/JPY, which were around 1.1705 and 147.45, respectively.
European stocks maintained an upward trend alongside US futures, driven mainly by the tech sector. Precious metals continued to attract interest, with gold rebounding and silver increasing by 0.6% to over $41. Currencies remained quiet, awaiting upcoming US economic data, especially the PPI and CPI figures.
We are seeing a major disconnect between the calm in the stock market and the serious geopolitical news from Eastern Europe. The downing of Russian drones by Poland, a NATO member, is a significant escalation that financial markets do not seem to be pricing in correctly. With crucial US inflation data also due in the next 24 hours, we expect a sharp increase in market volatility.
The market’s expectation of future volatility appears far too low given the circumstances. The CBOE Volatility Index (VIX) has been hovering near a historically low level of 14, which suggests widespread complacency among equity investors. We should consider buying VIX call options or options on other volatility indices to position for a potential market shock stemming from either a hot inflation report or a Russian response in Poland.
Hedging Opportunities
This calm in stocks, with S&P 500 futures pointing higher, presents a clear hedging opportunity. The market seems to be ignoring the lessons of February 2022, when geopolitical shocks led to a rapid downturn. Buying put options on the S&P 500 or the Nasdaq 100 offers a direct and cost-effective way to protect against a sudden reversal of the current upbeat sentiment.
Gold is acting as a true barometer of risk, pushing towards its all-time highs near $3,650. While it may seem expensive, any further military escalation would likely trigger a massive flight to safety, sending gold significantly higher. Using call option spreads on gold allows for betting on this upside potential while clearly defining the risk if tensions cool down.
The price of WTI crude oil at around $63 per barrel is particularly noteworthy, as it completely disregards the new risk to European stability. We saw oil surge past $120 a barrel in 2022 on the initial fears of supply disruption, making the current price look unsustainably low if the conflict widens. We view buying long-dated call options on crude oil as a logical hedge against the market repricing this heightened supply risk.
Tomorrow’s US CPI data is the other major catalyst that could shatter the market’s calm. After seeing core inflation remain stubbornly above 3.5% for most of 2025, a higher-than-expected number could force the Federal Reserve’s hand and trigger a sharp sell-off in both stocks and bonds. A straddle option on major currency pairs like EUR/USD could capture the large move expected from this data release, regardless of the direction.
The bond market is also sending mixed signals, with the 10-year Treasury yield at 4.091%. A serious escalation in Europe would cause a flight to the safety of US bonds, pushing this yield down sharply. On the other hand, a hot CPI report would send yields soaring, so we must be prepared for a significant move in rates in the coming weeks.
