Gold could be implying inflation remains sticky. How to play it with options

Three weeks ago, on March 14th, we proposed two bullish trades to take advantage of strength in gold, which has proceeded to rally to new highs. The Federal Reserve, as always, is trying to strike a balance between conquering inflation and navigating the soft-landing. Gold is highly interest-rate sensitive for two reasons. One is that it is not an income-producing asset, so its relative attractiveness if short-term rates are high when cash is paying a respectable rate, declines. Of course, if higher rates also successfully curb inflation then gold, as an inflation hedge, shines less brightly. GLD YTD mountain SPDR Gold Shares GLD But gold is shining brightly. So gold markets are implying that we could get some rate cuts, inflation will be sticky, or both. This has been good for the SPDR Gold Shares (GLD) June $205 calls which were $4.85 when we suggested them and it has been good for the VanEck Gold Miners ETF (GDX) June $28/$31/$34 call spread risk reversal which was initiated with no premium outlay and is now worth $1.30. One could roll all the strikes up by $3 each to the $31/$34/$37 and take in $1.30 in premium. (Rolling up in options trading means you close a trade and make a new one with the same expiration, but at higher strike prices.) Roll the GLD calls up to the June $215, selling the June $205 calls we purchased for $4.85 at $11, a $6.15 profit per contract, and take much of those profits and purchase the June $215s for $5.25, thus “playing with house money”. This provides continued exposure to the upside if the gold rally continues, while locking a modest profit as well. DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.