To The Moon

Recent capital markets can be summed up in one word: conflicted.

On one side, gold has charted an entirely independent course despite the pressure of high interest rates. On the other, U.S. equities have repeatedly swung between earnings support and the risks associated with elevated valuations. Against this macro backdrop, how should investors construct an appropriate trading strategy? Today, we will examine the underlying logic behind gold and expectations for a range-bound U.S. equity market, and take an in-depth look at how the market is operating at present.

Pay Attention to the Unusual Divergence Between Gold and U.S. Real Rates

For a long time, gold and real interest rates—bond yields adjusted for inflation—have had a classic seesaw relationship. Because gold is a non-yielding asset, higher real rates raise the opportunity cost of holding it, so gold prices should, in theory, decline. But that conventional relationship has now broken down: real rates continue to rise, while gold has climbed in tandem.

$黄金主连 2612(GCmain)$ $微黄金主连 2612(MGCmain)$ $1盎司黄金主连 2612(1OZmain)$ $黄金ETF-SPDR(GLD)$ $白银ETF-iShares(SLV)$ $白银主连 2609(SImain)$ $迷你白银主连 2609(QImain)$ $2倍做多白银ETF-ProShares(AGQ)$

Why has this divergence emerged? At its core, it reflects the market’s extreme concern over U.S. sovereign debt dynamics.

Whether non-farm payrolls disappoint sharply or rate-hike expectations fluctuate, the two-year U.S. Treasury yield has remained persistently elevated.$美国2年期国债收益率(US2Y.BOND)$

At the same time, even when non-farm payrolls have delivered major downside surprises—including negative growth—long-dated U.S. Treasury yields have continued to trend higher rather than falling sharply.

 $美国5年期国债收益率(US5Y.BOND)$ $20+年以上美国国债ETF-iShares(TLT)$

$美国10年期国债收益率(US10Y.BOND)$

This suggests that the market has begun to accept a “new normal”: a sustained rise in U.S. Treasury yields is almost inevitable. Investors see no effective way for the U.S. government to materially reduce its deficit, nor do they see AI-related companies reducing their reliance on debt issuance to replenish operating cash flow.

In this context, the Federal Reserve’s ambiguous stance and actions such as joint U.S.-Japan intervention in the yen all point toward the same objective: preserving the stability of the dollar’s value, allowing Treasury yields to rise in an orderly manner, and preventing an abrupt collapse in demand for U.S. Treasuries—such as demand from the Japanese government—that could trigger a disorderly spike in yields.

Put simply, the U.S. government is trying to maintain a fragile equilibrium in financial markets. The goal is simply to prevent the market from breaking down.

As dollar-denominated assets—U.S. equities and U.S. Treasuries—become less able to absorb additional portfolio-allocation demand, macro risks are quietly accumulating. Capital has therefore turned decisively to gold as its first choice for hedging systemic risk. As long as Treasury yields move higher in an orderly, volatile fashion, the U.S. Dollar Index does not suffer a sharp collapse, and U.S. equities can continue trading in a high-level range, gold should likewise continue to move higher.

Another way to view it is that gold has become an important constant—an increasingly indispensable factor in institutional asset-allocation frameworks. Institutions are continuing to increase their allocations accordingly. As a result, gold has broken free from the constraints of real rates and continues to rise.

Gold Playbook: Structurally Bullish, but Do Not Chase; Watch the 4,415 Resistance Level

Although gold is strongly supported by fundamentals, that does not mean investors should blindly chase the rally. From a trading perspective, gold is currently facing a very demanding technical test.

The gain in the front-month continuous gold futures contract has just reached around 10%, and the price has stopped precisely near the critical resistance area around 4,415. This level is not only prior-high resistance; it is also where the 50-week and 20-week moving averages converge. It is therefore exceptionally strong resistance and unlikely to be broken in a single attempt.

For that reason, I have already closed most of my earlier long positions and locked in profits. The next phase will likely involve repeated back-and-forth moves. If gold breaks above and holds 4,413 decisively, the weekly-chart descending-wedge compression pattern suggests that there could be considerable upside ahead. We can then rebuild long exposure gradually.

However, two potential risk factors could weigh on gold and deserve close attention:

A rebound impulse in the U.S. dollar: Seasonal trends in high-yield bonds and the Materials Select Sector SPDR Fund (XLB) are both weakening. These two pieces of supporting evidence point to stronger inflation expectations. The Fed may therefore maintain a hawkish stance, potentially triggering a rebound in the U.S. Dollar Index.

 $债券指数ETF-iShares iBoxx高收益公司债(HYG)$

$材料ETF(XLB)$

Developments in the yen exchange rate: USD/JPY is currently stabilizing around the key level of 155. If the yen repeats its earlier pattern of a sharp rally followed by a steep decline, the dollar will inevitably use that opportunity to rebound. That would directly signal the end of this rebound in gold.

 美元/日元(USDJPY.FOREX)$ $日元主连 2609(JPYmain)$

How Can Options Help Navigate a Range-Bound U.S. Equity Market?

Having discussed gold, let us turn to U.S. equities. Our view of the short- to medium-term market is: wide, high-level range trading.

 $纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2609(NQmain)$ $微型NQ100指数主连 2609(MNQmain)$ $标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $道琼斯(.DJI)$

On the one hand, the need for a correction from elevated levels has not been fully released. Based on the historical pattern around U.S. midterm elections, U.S. equities typically experience a weekly-chart decline before November. The decline so far is clearly insufficient relative to historical data, and August still carries the possibility of a pullback of up to 10%. In addition, the current patterns in the S&P 500 and the Goldman Sachs Momentum Index are highly similar to those seen at the 2021–2022 market peak.

 $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$ $道琼斯(.DJI)$

We therefore cannot rule out a scenario in which the market makes new highs before retreating again. According to the latest institutional reports, net positioning in Nasdaq futures has fallen sharply, indicating that this rebound has not received meaningful endorsement from major institutional capital.

On the other hand, investors should not maintain an unconditionally bearish, one-way view of U.S. equities. Why? Because fundamentals remain very strong. Among S&P 500 constituents, 84% of companies have reported EPS that beat expectations, while earnings have grown 50.3% year on year. Such strong fundamental support means that a one-way collapse in U.S. equities is unlikely.

So, how should we structure trading strategies in the current market?

Strategy 1: Gold Futures and Options

For gold, strategies can be considered across both futures and options.

For futures, using the technical pattern discussed above as a reference, investors may consider the current 20-week moving average of the continuous gold futures contract—around 4,413—as a level for establishing bullish long exposure. If futures break below this level, the position should be stopped out. The upside target is around 4,600. In the near term, investors should also monitor resistance from the 200-day moving average in the continuous gold futures contract; it would be preferable to follow the upside trend after that level is broken.

For options, investors may consider a bullish call spread on gold to capture potential gains from a future upward trend. For details, please refer to Mr. Gu Mingzhe’s guest-session transcript from last week.

@顾明喆 ：黄金的上升行情是刚刚开始吗？

Strategy 2: Use Long Straddles/Strangles to Trade a Rebound in VIX

Based on the 20-year historical average pattern, the VIX—the “fear index”—is currently at a relatively low level, while seasonal trends are gradually improving. In a volatile range-bound market where sharp moves could emerge at any time, using long straddles or strangles to capture an increase in the VIX can offer an attractive risk-reward profile.

For example, buy at-the-money call and put options on QQQ or SPY with the same strike price and the same expiration date, set two weeks out. If a major market move occurs and the VIX rises sharply, the straddle/strangle position is likely to become profitable.

The advantages of this strategy are that overall risk exposure is controllable and the position is directionally neutral: there is no need to predict whether the market will rise or fall. The stop-loss condition is also clear. If the VIX falls below a key support level—indicating that volatility is failing to recover—close the position immediately to limit losses.

Strategy 3: Systematically Sell Out-of-the-Money Index Puts

In a market that is range-bound with a bullish bias, or trading in a broad range at elevated levels, selling out-of-the-money put options is an effective way to harvest time value. Investors can select strike prices roughly 7% below U.S. equity indices, such as the Nasdaq or S&P 500, and roll the positions on a weekly basis.

If the index moves sideways or rises modestly, the premium is retained. If the index declines gradually, the strategy still provides a relatively generous cushion. The stop-loss rule is to close the position immediately if the price falls below the strike price.