Precious Comment Gold Renewed Elevated Call Option Demand Raises Volatility and Upside Price Risk

Commodities Research 21 August 2026 | 2:32PM BST

Precious Comment: Gold: Renewed Elevated Call Option Demand Raises Volatility and Upside Price Risk

n Gold call option demand has risen sharply amid renewed demand for global Lina Thomas | macro-policy hedges, creating a mechanical price amplifier to both the upside Goldman Sachs International and downside: As gold prices approach key strike levels, dealers that have sold Daan Struyven these calls may be forced to buy gold to hedge their exposure, accelerating the | rally. Conversely, any pullback in the gold price can prompt dealers to unwind Goldman Sachs & Co. LLC

those hedges, adding selling pressure and amplifying the price downside. n At the same time, market conviction around further Fed hikes — the main headwind for gold since March — has weakened following the July FOMC hold and softer July US employment and CPI reports. This has supported a partial recovery in COMEX net speculative positioning and rate-sensitive gold ETF demand, helping lift gold prices by 15% from their mid-July low to nearly $4,600/toz, with rising and elevated call option demand likely amplifying the move. n Our economists expect lower inflation to keep the Fed on hold, creating further room for Western investment demand to recover. A further pickup in Western investor demand, alongside continued strong central bank demand, could push gold prices toward key strike levels, where dealer hedging could mechanically accelerate the rally. n We therefore continue to see significant upside risk to our $4,900/oz end-2026 gold forecast, but also greater two-sided volatility to the gold rally. Our fair-value forecast of $4,900/toz by end-2026 assumes continued strong central bank demand and a recovery in private investor ETF demand as the Fed remains on hold in 2026. It does not incorporate elevated demand for global macro-policy hedges through gold call options.1 If ETF investor inflows recover as expected and the current elevated call option positioning persists, dealer hedging could mechanically amplify the rally and drive gold prices well above our forecast. Conversely, a renewed increase in Fed-hike expectations could likewise trigger dealer hedge unwinds and produce a sharper-than-usual correction.2

1 Our end-2026 gold price forecast assumes open interest of calls net of puts on GLD — the largest gold ETF — at ~1.3 millon contracts (vs. ~2.5 million contracts currently). 2 We define a sharper-than-usual potential correction as larger than our usual rule of thumb of a 2% price decline for each 100 tonnes of net selling implies.

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Goldman Sachs Precious Comment

Gold Call Option Demand Has Risen Sharply

Source: Bloomberg, Goldman Sachs Global Investment Research

The authors would like to thank Samuel Jönsson — an intern on our commodities research team — for his contributions to this report.