Happy Thursday, GoldBuzzers!

Two stories collide in today's issue: the charts say gold and silver may be finding their floor, while someone in the options market is spending millions on the idea that the ceiling is much, much higher. One of those bets pays out $5.5 billion if it lands.

Ok. Let’s get into it. ⬇️

Gold briefly touched $4,150 an ounce on Wednesday, its highest level since July 7, and silver followed, climbing back above $60 after last week's shakeout, before both gave up some gains in late trading. The driver was familiar: President Trump warned of further strikes on Iran and Houthi rebels disrupted shipping through the Red Sea, while Secretary of State Marco Rubio said Washington remains open to a deal but doubts Tehran will accept terms it can live with.

Elevated oil prices are the complication. They feed inflation, and inflation feeds the case for higher rates, which is a big part of why both metals still sit well below January's record highs.

The Fed meets next Wednesday, July 29, and while almost nobody expects a move at this meeting, markets lean toward the first 25-basis-point hike landing in September, with one or two more expected before year-end. We’ll get our next clue when the Fed speaks on Wednesday.

Gold and silver have perked up over the past few sessions, climbing to two-week highs as safe-haven money drifts back in. Nice to see, but that's not the full story.

The story is what's happening underneath the price action, where two very different groups of market participants are quietly arriving at the same conclusion.

The technical case that this could be a bottom

Let’s start with the gold-to-Dow ratio, a simple measure of how gold is performing against US stocks. It broke higher in April 2024, right at the start of what many now recognise as a new bull market in hard assets. At the time, silver was sitting near $27, platinum around $1,000, and the big miners were trading at prices that look almost embarrassingly cheap in hindsight.

What followed was the usual script. Enthusiasm built, the move overshot in January, and then the whole thing retraced. The ratio has now pulled all the way back to the symbolic 0.618 Fibonacci retracement level, landing on a support zone that stretches back to 2014. In plain English: the froth has been washed out, and the ratio is sitting on a floor that's held for over a decade.

And it's not just one chart. Gold, silver and several broader commodity charts are all showing the same pattern: price making lower lows while momentum indicators refuse to follow. That's genuine bullish divergence, and when it shows up across multiple markets at once, it’s worth paying attention.

Then there's sentiment. A few months ago everyone was bullish. Now? Conviction has evaporated. The investors who piled in during the euphoric phase are throwing in the towel, which sounds grim but is exactly what major cycle lows look like. Bottoms aren't made when everyone's excited. They're made when the last optimist gives up.

The options market: someone's betting big

While the chart watchers debate support levels, something unusual is happening in the derivatives market. Open interest is piling up in deep out-of-the-money call options on December gold, at strikes of $6,000, $8,000, $15,000 and even $20,000 per ounce. The chart below shows the full ladder, and the sizes involved are anything but trivial.

Each Comex gold option covers 100 ounces, yet the far-out strikes are astonishingly cheap: the $20,000 calls were recently quoted at around a dollar per ounce, roughly $100 per contract. One wrinkle worth knowing is that much of this is reportedly structured as $15,000/$20,000 call spreads (buy the lower strike, sell the higher), which trims the cost and caps the winnings. It also means part of that eye-catching $20,000 open interest is the sold half of the trade rather than fresh bulls betting on $20,000 gold.

Even so, the sums are remarkable. One widely reported spread position cost roughly $3.3 million to build and would pay out around $5.5 billion if gold reached $20,000 by expiry, over 1,600 times the stake. Nobody's forecasting $20,000 gold as their base case. They're paying a small premium for enormous exposure to a scenario most people consider impossible: a major supply disruption, sustained monetary debasement, or a shock big enough to reprice the entire metals sector.

Why these two signals matter together

Here's what I think is the interesting bit. The technical picture and the options flow aren't telling contradictory stories. The charts identify the conditions for a powerful reversal: washed-out sentiment, generational support, momentum stabilising. The options positioning shows forward-looking capital already sizing up the magnitude of the move if that reversal confirms. One says "the floor is here", the other says "and the ceiling might be a long way up".

What confirmation looks like

None of this is a done deal yet. Confirmation needs gold and silver to hold their recent gains and push decisively through near-term resistance, ideally with the miners joining in rather than lagging behind. If that doesn't happen, the consolidation drags on and the moonshot options expire as cheap souvenirs of a rally that never came.

But the setup is worth watching closely. Weak hands are out, price is sitting on support that dates back to 2014, and some seriously aggressive money is positioning for upside.

The coming days and weeks will tell us whether this is the start of the next major leg higher or just another pause. Either way, when the chart watchers and the options whales start agreeing with each other, it's rarely boring for long.

That’s all for this Thursday, folks. See you on Sunday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com