The "Gamma Squeeze" may have accelerated the sharp decline in gold prices

SpeakWithHatOn · 2026-03-04T19:02:41+00:00

A recent report suggests that a phenomenon known as "gamma squeeze" contributed to a significant drop in gold prices, as traders adjusted their positions in response to market fluctuations, amplifying volatility.

SpeakWithHatOn

2026-03-04 19:02:41

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According to a report by PANews on January 31, analysis by institutional investors suggests that the significant decline in gold prices recorded on Friday was likely influenced by a phenomenon known as “gamma squeeze.” Analytical firms such as Golden Ten Data point out that this market mechanism may have been one of the factors that worsened the price volatility.

The Options Market Mechanism and “Gamma Squeeze”

A “gamma squeeze” occurs when market prices pass through certain levels, forcing traders holding options sell positions to mechanically buy or sell futures or ETF shares to maintain their portfolio balance. Specifically, when prices move above the strike prices of a large number of options, buy orders increase; when prices fall below these levels, sell orders accelerate. This auto-adjustment mechanism tends to amplify market volatility further.

Current Situation of SPDR Gold ETF and CME Options Market

On Friday, a large number of options with strike prices at $465 and $455 expired in the trading of SPDR Gold ETF. Additionally, in the CME market, many positions are concentrated around strike prices of $5300, $5200, and $5100 for March and April options, suggesting that “gamma squeezes” could be triggered as prices pass through these levels.

The presence of simultaneously compressed positions across multiple markets may have contributed to the larger amplitude of this gold price movement.

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