Insights 
VT 
The Gold price has surged to a record high of nearly $4,180 per ounce, even as other markets recovered. Despite market corrections, demand for Gold has continued to rise.
This increase is partly attributed to renewed concerns over the US-China conflict. Recent tensions were exacerbated by China’s sanctions on the American units of a South Korean shipping company.
Ongoing Conflict
These actions were a retaliatory response to US sanctions on China’s shipping sector. The ongoing conflict extends beyond trade issues, raising the possibility of further escalation.
The planned meeting between Presidents Trump and Xi at the APEC summit in South Korea is likely to be affected by these developments. In this tense geopolitical environment, the demand for Gold remains strong.
With gold reaching a new record of nearly $4,180 an ounce, the primary driver is a clear flight to safety amid escalating US-China tensions. These renewed conflicts, underscored by tit-for-tat sanctions on shipping companies, suggest that the demand for safe-haven assets is unlikely to fade in the immediate term. Traders should view this not as a typical commodity rally but as a direct response to geopolitical instability.
The heightened uncertainty has caused implied volatility in gold options to surge. The Gold Volatility Index (GVZ) is up over 35% in the past month, trading at levels we have not seen since the global supply chain disruptions of early 2024. This means options premiums are expensive, rewarding strategies that can effectively manage or profit from significant price swings.
Potential Trade Strategies
For traders anticipating that tensions will worsen ahead of the APEC summit, buying call options or establishing bull call spreads could capture further upside while defining risk. We saw a similar dynamic during the 2019 trade disputes, where gold rallied over 20% in just a few months as negotiations between the two nations faltered. The current environment is showing a comparable pattern of investor anxiety.
Conversely, the planned meeting between the two presidents at the APEC summit represents a significant event risk. Any unexpected positive development or signal of de-escalation could trigger a rapid sell-off in gold as capital flows back into riskier assets. Therefore, holding protective put options against long futures positions is a prudent hedge against a sudden reversal.
