Gold and silver encounter "Bloody Friday": Professionals say this may be caused by options.

On Friday, the intraday decline of spot gold approached 13%, the largest drop in over 40 years since the early 1980s, exceeding the drop during the 2008 financial crisis. Spot silver also experienced a sudden drop of over 35% intraday, marking the largest decline on record. Professionals believe that the options market trading further magnified price volatility. Market participants pointed out that behind the sharp drop in gold, there may be a "gamma squeeze" effect contributing to the momentum. Gamma squeeze refers to options market makers needing to buy more futures or ETF shares when prices rise in order to maintain hedging balance while selling in reverse when prices fall, thus exacerbating the cyclical volatility of the market. Aakash Doshi, global gold and metals strategy director at Deere Investment Management, stated, "This is likely a gamma squeeze brought on by market makers hedging. Investors have been buying a large number of near-term call options in recent weeks, increasing short-term options demand. When the momentum in spot prices accelerates upwards, market makers' hedging operations may further drive gold prices parabolically upwards." Doshi believes that as the end of the month approaches and with President Trump nominating Kevin Warsh as the next Federal Reserve Chair, this options-driven uptrend is rapidly showing signs of "reverse unwinding," leading to a drastic pullback in gold prices. Options open interest structure also indicates concentrated expiries at key levels. The SPDR Gold ETF (GLD.US) has a large number of options expiring near $465 and $455 strike prices on Friday; in the COMEX gold options market, the March and April contracts have significant positions near $5300, $5200, and $5100 levels. Despite technical indicators suggesting the possibility of further downside in gold prices, Doshi points out that from a structural allocation perspective in 2026, this pullback may actually present a buying opportunity as "gold's long-term allocation advantage has not disappeared." It is worth noting that options traders have not completely exited the market. The one-month implied volatility of GLD and iShares Silver ETF (SLV.US) remains high, indicating a strong market expectation for future price volatility. Mandy Xu, head of derivatives market intelligence at Cboe Global Markets Inc, stated that despite the large drop in gold prices, there has been an increase in bullish bets in the options market, with GLD's options skew further inverting, as investors increase their buys on call options betting on a rebound. In the COMEX market, investors have executed about 1500 "end of year bullish combinations", betting on a significant rebound in gold prices in the future. Earlier this week, similar bullish trades saw turnovers of over 5500 contracts. At the same time, a large-scale long-term trade appeared in the SPDR Gold ETF, with funds heavily positioning in options expiring in January 2027, buying protective puts while selling more puts, indicating preparation for the risk of further gold price decline in the next one to two years in overall strategy.