Back Derivatives Strategy

Add Tactical GLD Upside Call Spreads Following Pullback to Support as US$ Continues to Make New Lows

Published on June 26, 2025

Jeff Jacobson

We have seen gold (GLD) pullback ~ 3.4% from the highs hit 2-weeks ago. Those highs hit most recently were also right at the April all-time highs for GLD ~ 317-318. What is surprising to me is this pullback has been happening as the US$ index (DXY) has been making new lows (a weaker US$ is typically bullish for gold). I believe some of the recent weakness in gold has been a function of the risk-on push we have seen into quarter-end. We can see this playing out when we look at the GLD/SPY relative spread which has declined by over 5% in just the past 2 weeks and is now back near the recent lows (see below).

As we move into quarter-end, I really like the setup to tactically add short-term GLD upside call spreads. Besides the pullback to potential support for gold, here are some other reasons why I believe buying GLD call spreads here (and into quarter-end) makes sense:

1) As mentioned above, the US$ index continues to make new lows. A declining US$ remains a huge tailwind for gold

2) GLD 1-month upside call vol is down from a high ~ 26 to a current 15.5 (a 3-month low) and it continues to trade at a discount to 30-day realized vol

3) We could see a bid back into gold should we see the risk-off trade take a break as we move into Q3 and ahead of some key events (economic data/tariff deadlines, etc)

4) July has been the best month for gold over the past 5 years with an average 1-month gain of 3.7% (and a 5.4% jump last July)

Trade:
Buy GLD Aug 1^st 315/335 call spread for $2.90 (GLD 306.90 ref)

Trade Details:

Buying the 1-month upside call spread in GLD following recent pullback (even as $ index makes new lows)
Call spread starts 2.6% above current levels and is targeting a breakout to new highs over the next month
GLD/SPY relative spread back to the May lows as the risk-on trade has taken hold into quarter-end (could see a bid back into gold should we see a break in the risk-on trade as we start the new quarter)
GLD call vol at a 3-month low and still trades at a discount to 30-day realized vol
Call spread offers a nearly 6x to 1 max payout on the limited-risk structure
Really like the Aug 1^st expiration as it captures both the June and July payroll reports, as well as the next FOMC meeting at the end of July
Call spread can be bought as an add-on trade to an existing long/bullish gold position, or as an entry-point trade on the recent pullback
Please contact me or the 22V sales team for updated pricing and execution capabilities

Gold (GLD) with a pullback from the recent highs towards longer-term support

Gold pullback has been happening as US$ index (DXY) continues to make new lows

GLD/SPY relative spread pulling back towards the May lows

GLD 1-month upside call implied volatility at a 3-month low and continues to trade at a discount to 30-day realized vol

July has been the best month for gold over the last 5 years with an average gain of 3.68% (5.37% gain last July)

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