As gold prices continue their downward trajectory, capital flows in the derivatives market indicate that traders are anticipating this trend to persist for an extended period, with some even betting on sustained pressure for years to come.

Options trading surrounding the gold ETF SPDR Gold Shares (GLD) is showing distinct bearish signals. According to data from ThinkOrSwim and SpotGamma, amid another drop of over 4% in gold prices on Wednesday, approximately $1.3 billion of the roughly $2 billion in premium traded in the options market was concentrated in put options. Concurrently, the volume of selling call options continued to outpace purchases.

Analyzing the specific trade structure reveals that eight of the ten most active option contracts that day were puts. Furthermore, more than half of the associated premium was transacted at the best ask price or higher, signifying that buyers were actively entering to position for downside risk.

Price action also confirms the shift in market sentiment. Since hitting a record intraday high in February, the GLD has declined by a cumulative 25%, with selling pressure intensifying.

Regarding specific contracts, the highest-volume trade was an in-the-money put option with a strike price of 380 expiring that same day. The second most active was a put option expiring in June 2028 with a strike price of 240, priced at $11.50 per contract. This long-dated contract reflects a more aggressive outlook, implying some investors are betting gold prices could fall by approximately 40% over the next two years.

The factors driving the pressure on gold are attributed to multiple macro and policy backdrops. Nigam Arora, founder of The Arora Report, stated in a call, "The Turkish central bank is selling gold and buying dollars to try and support the lira, and Gulf countries—Qatar, the UAE, Saudi Arabia—they need funds for war, so they are also selling gold."

He also noted that India's increase in gold import tariffs, combined with technical traders setting stop-loss orders below $4,400, which trigger passive selling once breached, have collectively exacerbated the downward pressure.

In contrast to physical gold and its ETFs, however, options trading for products related to gold mining stocks shows a different inclination. Taking the VanEck Gold Miners ETF (GDX) as an example, the volume of call options on Wednesday more than doubled that of put options, with purchases of calls tripling those of puts.

The largest single options trade for GDX that day was a short straddle strategy: an investor simultaneously sold 2,000 each of call and put options expiring in December 2028 with strike prices near the current share price, totaling nearly $8 million. This strategy would be profitable if the ETF remains within a range of approximately $35 to $115 until expiration.

Commenting on this, Arora said, "When gold was above $5,000, gold mining stocks never rose to the levels they should have." He believes that allocating to gold mining companies is more attractive than holding physical gold directly, stating, "If their average cost is around $1,500, their profits will be very substantial."