Gold - using options to guide a mean reversion strategy

15 Sep 2021

We’ve been waiting for a break of the -1.0% to -1.1% range in US TIPS, and one suspects when we do see a break it will marry with a corresponding move in XAUUSD too – as it stands, the weekly (options) straddle breakeven range sits at 1827 to 1780 – with the market putting a 68.2% probability price is contained in this range over the coming week - you can also see both levels marry nicely with the 7 Sept high and series of bids through Aug-Sept – this is the range mean reversion players can look at near-term.

We saw price having a bullish engulfing yesterday, but there has not been any follow-through at the 50% retracement of the recent range. Are we looking at reversal, and price eyeing a re-test towards 1780? I suspect so, but with the RSI mid-range and real rates showing no clear trend – gold is likely to whip around in an 1827 to 1780 range for now and traders may lean into these levels for positions.

CW