Gold Bulls Keep Betting on Higher Prices After the Selloff, but the Rally Is Getting More Cautious

Professional investors are still positioning for higher gold prices after Friday’s sharp decline. The difference is how they are doing it: cheaper, more controlled options trades suggest confidence in further upside without the speculative excess seen earlier this year.

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Gold’s sharp retreat after Federal Reserve Chair Kevin Warsh’s Jackson Hole speech looked, at first glance, like a serious challenge to the August rally. GoldRates recorded 24K gold at $145.41 per gram on August 28, down from $149.67 three days earlier, after Warsh pushed markets toward higher expectations for another U.S. rate increase.

But beneath that selloff, a different signal is coming from professional derivatives markets. According to Bloomberg, investors have continued to build bullish positions in gold through call spreads and more complex cross-asset options. The trades are designed to benefit if bullion rises, but they are generally cheaper and more controlled than simply buying large volumes of outright call options.

That distinction matters. It suggests that institutional investors have not abandoned the bullish case for gold after the latest pullback. They appear to be changing the way they express it.

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The gold trade is bullish, but less euphoric

Gold’s August recovery has been substantial. Bloomberg reported that spot gold was up about 10% for the month through the end of last week, even after Friday’s retreat. The move followed renewed concern over the U.S. dollar and long-term government borrowing costs after the Treasury announced plans to increase buybacks of older long-dated debt.

That policy shift helped revive what markets have been calling the “debasement trade”: the idea that investors may prefer scarce assets such as gold when they become less comfortable with government debt, inflation risk, or the purchasing power of fiat currencies.

The important change is that the latest derivatives activity looks more restrained than it did during gold’s explosive move earlier in 2026.

Bloomberg reported that implied volatility in gold options has risen during the August rally, but remains below the levels seen in the first quarter. The premium investors are paying for bullish options is also less extreme. In practical terms, traders still want exposure to higher gold prices, but they are not paying as aggressively for unlimited upside.

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Why traders are using call spreads instead of simply buying calls

A call option gives an investor the right to benefit from a price move above a specified level. Buying an outright call can provide substantial upside if gold rises sharply, but the option premium can become expensive when demand for bullish exposure surges.

A call spread lowers that upfront cost by combining a purchased call with the sale of another call at a higher strike price. The trade gives up some of the potential upside in exchange for a cheaper and more defined position.

That is useful information for anyone trying to understand current market sentiment. Investors using spreads are still bullish. They are simply placing a ceiling on the amount of upside they are paying to capture.

Neeraj Chaudhary, Bank of America’s head of exotics and flow for Europe, the Middle East and Africa and co-head of global hybrids trading, told Bloomberg that some investors now see the next move in gold as more capped and potentially range-bound. He cited $4,900 to $5,300 an ounce as an example of the type of range being considered.

That should not be interpreted as a formal Bank of America price target. It is more useful as evidence of how certain sophisticated investors are structuring their trades: bullish enough to position for a return toward the upper part of gold’s 2026 range, but cautious enough to limit what they pay for a much larger breakout.

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The latest rally has a broader foundation

Options activity is not the only sign that investors have been returning to gold. Gold-backed ETFs recently recorded their strongest weekly inflow in 10 months, with Reuters reporting 46.7 metric tons of inflows worth about $6.4 billion during the week.

The World Gold Council also reported that global gold ETFs attracted $3 billion in net inflows during July, reversing two consecutive months of outflows. Holdings increased by 23 metric tons to 4,068 tons.

The Council has also described August’s recovery as being supported by stronger ETF flows and continued central-bank buying, although it cautioned earlier in the month that the rally was still more tactical than broad-based.

Taken together, the ETF and derivatives signals suggest that professional interest in gold has strengthened. What has not returned, at least not to the same degree, is the highly aggressive positioning that accompanied the first-quarter surge.

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Warsh changed the rates story, but not every gold story

Friday’s decline still matters. Reuters reported that market expectations for a September Federal Reserve rate increase rose sharply after Warsh emphasized the need to keep fighting inflation. Higher interest rates and a stronger dollar are normally difficult conditions for gold because bullion pays no yield.

If Treasury yields continue to rise and the dollar strengthens, the immediate pressure on gold could continue.

The reason investors have not simply abandoned bullish positions is that the case for gold no longer rests on a single expectation about Federal Reserve policy.

Fiscal concerns, government borrowing, the dollar, central-bank demand, geopolitical risk and portfolio diversification can all support gold under different circumstances. That gives the metal several potential paths to perform well even if the Fed remains restrictive.

Bank of America derivatives strategist Joseph Khouri made essentially that point to Bloomberg, saying gold has appeared repeatedly as the bullish side of cross-asset trades because there are multiple macroeconomic scenarios in which the metal can rise.

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What this means for the gold outlook

The latest positioning does not mean gold is guaranteed to return to $5,000, nor does it remove the risk of a deeper correction after August’s fast rally.

It does, however, make the market’s reaction to Friday’s selloff more interesting. The price decline was sharp, but institutional positioning appears to be saying something more nuanced than the chart alone: investors are less willing to pay for an explosive move, yet many are still willing to bet that the next major direction is higher.

That is a healthier backdrop than outright speculative euphoria. A market in which investors define their risk, limit their option costs, and target realistic ranges can still fall. However, leveraged momentum does not dominate this market in the same way.

For now, the key question is whether gold can stabilize after the Warsh-driven repricing. If the dollar and yields remain firm, bullion may struggle to regain its August highs quickly. If concerns over U.S. debt, currency purchasing power, or geopolitical risk return to the foreground, the bullish positions now being built could receive another test.

The clearest conclusion is that Friday’s fall weakened the momentum of the rally, but it did not end the institutional case for higher gold prices.

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