Traders Buy GLD Puts That Profit If Gold Drops 40% by 2028

Options traders have increased bearish bets on the SPDR Gold Shares ETF (GLD). In one trading day this week, about $200 million in GLD options premium changed hands, with roughly $130 million tied to put contracts. Eight of the 10 most active contracts were puts, and the majority of those positions were purchases rather than sales.

The 240-strike put expiring in June 2028 was the second-most active contract and traded near $11.50. That contract would become profitable if GLD falls about 40% from current levels.

SPDR Gold Shares has dropped about 25% from its February intraday record. Spot gold is down roughly 26.5% from a January peak, a decline that analysts estimate erased about $9.8 trillion in market value. Silver has fallen about 47.7%, a drop estimated to have removed around $3.2 trillion. Combined losses across gold and silver are near $13 trillion over roughly four months.

Market participants and some official holders have been selling bullion to raise liquidity. Nigam Arora, founder of the Arora Report, wrote, “Turkey’s central bank is selling gold and buying dollars to support the lira, and Gulf nations — Qatar, UAE, Saudi Arabia — have been selling gold to raise cash.” Arora also pointed to higher Indian import duties and stop-loss trading near $4,400 as factors that may have accelerated liquidations.

Several major banks have reduced near-term price forecasts. One large bank cut its three-month gold target to $4,000 an ounce from $4,300, citing limited catalysts for a sustained rally in the near term.

Economist Peter Schiff argued a prolonged conflict could support higher prices for the metal and noted that gold has retraced toward its March 23 low near $4,098 after trading below $4,150.

Current options flows show higher demand for put protection and speculative bearish positions on GLD.