Deutsche Bank links changes in central bank reserves to shifting geopolitics, with a move towards gold and away from the US dollar. It sets out a framework that ties gold’s reserve share to central bank gold holdings, the gold price, and the level of global foreign exchange (FX) reserves.

The article contrasts the rise of a US-led global order after 1989 with today’s more divided environment. It states that gold’s declining role in reserves followed the 1990s geopolitical shift, rather than the end of Bretton Woods in the 1970s.

Gold Reserves And Geopolitics

It reports that the US dollar’s share of central bank reserves has dropped from over 60% to 40%. Over the same period, gold’s share is said to have risen to 30% after tripling from its low point.

The framework identifies three drivers: how much gold central banks hold, the price of gold, and total global FX reserves. It attributes current movement in all three areas mainly to emerging market central banks, including gold purchases and the possibility of FX reserves starting to decline.

Geopolitical shifts are reshaping the global financial order, pushing central banks to prefer gold over the US dollar. This move is not driven by monetary policy but by a reaction to the changing balance of world power. We are seeing a structural trend where countries are actively reducing their reliance on the dollar.

This trend is backed by recent data from the World Gold Council, which reported that central banks added a robust 290 tonnes to global reserves in the first quarter of 2026. This strong start to the year follows the near-record buying we witnessed throughout 2025, where over 1,000 tonnes were purchased. The sustained demand from emerging market banks provides a strong floor for the gold price.

Trading Implications For Gold

Simultaneously, the dollar’s dominance in foreign exchange reserves continues to wane. The latest IMF data from the end of 2025 showed the dollar’s share of allocated reserves had fallen to 58.2%, a level not seen in decades. Ongoing trade friction and sanctions have only encouraged nations to seek alternatives.

For traders, this points to continued upward pressure on gold, which has already climbed to over $2,450 an ounce this year. One strategy is to use call options or bull call spreads on gold ETFs to capitalize on further gains while limiting risk. The persistent central bank buying acts as a significant tailwind that is unlikely to reverse quickly.

The underlying geopolitical tension suggests volatility will remain elevated, making options pricier but also potentially more valuable. Traders should also consider strategies that benefit from a weakening dollar, such as put options on the U.S. Dollar Index (DXY). This provides a way to trade the other side of the de-dollarization trend.

We must pay close attention to the actions of emerging market central banks, as they are the primary drivers of this movement. Their continued purchases are putting upward pressure on gold prices. It is also crucial to watch if their foreign exchange reserves begin to decline, as this would signal a major shift in global capital flows.

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US EIA crude oil stocks fell by 6.233M for the week ending 24 April. The previous reading was an increase of 1.925M.

The update comes from the US Energy Information Administration (EIA). It reports weekly changes in crude oil stock levels in the United States.

Crude Inventories Signal Tightening Market

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We are seeing a significant and surprising draw of over 6.2 million barrels from US crude inventories, a sharp reversal from the build we saw the week prior. This large draw indicates that demand is running much hotter than anticipated, suggesting an undersupplied market. This is a fundamentally bullish signal for crude oil prices heading into May.

This inventory report comes just as we are on the cusp of the summer driving season, a period that historically boosts gasoline consumption and, therefore, crude demand from refineries. The latest industry data shows U.S. refinery utilization rates have already ticked up to 90.1%, confirming that facilities are ramping up production to meet this expected seasonal surge. We should anticipate this trend to put a floor under prices in the near term.

The bullish inventory data is being amplified by a backdrop of solid economic activity and persistent geopolitical risk premiums. Recent manufacturing PMI data came in at 52.5, indicating a healthy expansion that supports robust energy consumption. Meanwhile, ongoing shipping disruptions in key maritime chokepoints continue to tighten global supply chains, adding further upward pressure to prices.

Positioning And Volatility Implications

For derivative traders, this environment favors establishing long positions. We could see WTI futures make a sustained push toward the $95 per barrel resistance level in the coming weeks. Bullish strategies, such as buying call options or call spreads on WTI or Brent contracts, should be considered to capitalize on this expected upward momentum.

Looking back, this setup is reminiscent of the market action we observed in the spring of 2025. Back then, a series of unexpectedly large draws kickstarted a rally that lasted through the entire summer. History suggests that such a strong signal from inventory data this close to peak demand season should not be ignored.

Given the surprise nature of this large draw, we should expect implied volatility in the oil options market to increase. This will make options more expensive, but it also presents opportunities for strategies like selling cash-secured puts or put credit spreads. These positions allow us to express a bullish-to-neutral view while benefiting from the higher premiums.

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Kevin Warsh, nominated by US President Donald Trump to be Chair of the Federal Reserve, has been approved by the US Senate Banking Committee. The committee vote was 13-11, with Republicans outnumbering Democrats.

Warsh now faces a confirmation vote by the full US Senate. If confirmed, he would replace Federal Reserve Chair Jerome Powell when Powell’s term ends on 15 May.

Warsh Nomination And Market Volatility

US Senator Elizabeth Warren opposed the move and said, “A vote to advance Warsh is a vote to help Donald Trump take over the Fed.”

With Kevin Warsh now one step closer to leading the Fed, we must prepare for a significant increase in market volatility. Warsh is widely viewed as being more hawkish than Powell, meaning he may be quicker to raise interest rates to fight inflation. The VIX, a key measure of market fear, has already crept up to 18.5 this week, and we should consider buying protection as his full confirmation vote approaches.

The bond market is already reacting to this potential leadership change, which comes right after the latest March 2026 CPI report showed inflation is still sticky at 3.1%. The two-year Treasury yield, highly sensitive to Fed policy, has jumped 15 basis points to 4.85% since the committee vote was announced. We are positioning for this trend to continue by looking at options on interest rate futures that would profit from a more aggressive Fed policy through the summer.

We remember the market whiplash in late 2025 when unexpected inflation data forced the Fed to walk back its dovish guidance. A similar environment of uncertainty is now upon us, but this time it is driven by a potential change in leadership philosophy. Historically, markets react poorly to unpredictable Fed policy, as seen during the sharp sell-offs in 2018 when the Fed was aggressively tightening.

Positioning Ahead Of The May Deadline

Given the May 15 deadline for Powell’s term ending, implied volatility on equity index options expiring in late May and June is becoming expensive. We are seeing a notable rise in skew, as demand for downside puts on the S&P 500 far outpaces calls. Traders should review their portfolios for downside risk, as a Warsh-led Fed could prioritize fighting inflation over supporting asset prices.

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The US dollar is broadly steady as resilient US equities and strong corporate earnings reduce risk aversion, even as Middle East tensions rise and the Strait of Hormuz remains closed. This backdrop is linked to rising front-end US yields and firmer demand for the dollar.

Crude oil has moved back above USD 110 per barrel, raising the risk of tougher economic conditions over the summer. Europe and Asia are described as more exposed, with added downside pressure on the euro and Asian currencies if the situation persists.

Fomc Message And Policy Stance

Ahead of the FOMC meeting, the expected message is that current monetary policy is well placed given uncertainty. Guidance is expected to remain limited, with emphasis on having time to assess risks.

Fed Chair Powell is expected to sound more hawkish than in March, due to signs of inflation risk alongside a resilient economy and equity markets. If front-end yields rise, the article points to growing downside risk for EUR/USD and upside risk for USD/JPY.

The US dollar looks set for a strong run in the coming weeks, despite positive stock market performance. We see the Federal Reserve taking a tougher stance on inflation at this week’s FOMC meeting. This outlook creates clear opportunities in currency and interest rate markets.

Rising oil prices, now consistently above $112 per barrel due to the Hormuz situation, are fueling inflation fears. The latest US CPI data from March 2026 came in hotter than expected at 3.8%, giving the Fed reason to sound more hawkish. We recall the rate hike pause through most of 2025, but this new data suggests price risks are building again.

Trading Ideas In Fx And Rates

For traders, this points to a stronger dollar against the yen, especially as Japan’s recent trade deficit widened due to high energy costs. Buying call options on the USD/JPY pair could be a direct way to position for this expected upside. This strategy offers a defined risk if the dollar’s momentum stalls.

We also see growing weakness in the euro, with Europe being hit harder by the energy shock. Germany’s latest manufacturing PMI, which fell to 48.5, confirms this economic strain. Therefore, buying put options on the EUR/USD is a straightforward way to trade the expected decline.

The expectation of a more hawkish Fed will likely push short-term US interest rates higher. Traders can position for this by shorting short-term interest rate futures, like those tied to the SOFR. This trade profits directly if yields at the front-end of the curve jump as anticipated.

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Berkshire Hathaway (BRK.B) is described as being in an upward Elliott Wave trend, with higher highs and higher lows over recent years. The advance is labelled as an impulsive cycle that moved into wave ((3)) before a correction began.

After wave ((3)) ended, the stock moved into wave ((4)), which is presented as a complex correction. The correction is labelled as a W-X-Y pattern, which is associated with sideways-to-downward consolidation and multiple swings.

Wave Four Support Zone

Wave ((4)) is projected to move lower towards a support zone between 433 and 388. This area is linked to Fibonacci levels, including 1.0 and 1.618 extensions of earlier corrective swings.

After wave ((4)) completes, the next rise is labelled wave ((5)). The move is expected to push above the prior wave ((3)) high and continue the longer-term trend.

The text also refers to potential set-ups after the correction completes a 3, 7, or 11 swing structure within the 433–388 zone. The overall view presented is that a pullback into this range could precede a further upward phase.

We see Berkshire Hathaway is in a long-term bullish cycle, though it is currently in a corrective pullback. Derivative traders should be patient, as the stock is expected to find a floor in the $433 to $388 range in the coming weeks. Selling into this expected weakness would be ill-advised.

Options Strategy Considerations

This anticipated dip aligns with broader market uncertainty, as April 2026 inflation data has futures markets pricing in a delayed Fed rate cut. Despite this, Berkshire’s fundamentals remain solid, with Q1 2026 operating earnings showing an 8% increase year-over-year, driven by its insurance and railroad segments. The company’s cash pile also grew to a record $210 billion, providing a significant buffer.

A practical approach is to consider selling cash-secured puts with strike prices within that $433 to $388 support zone. By choosing expirations 45 to 60 days out, like those for June or July 2026, traders can collect premium while waiting for the expected bottom to form. This strategy allows one to either keep the income if the stock stays above the strike or acquire shares at a more attractive price.

Alternatively, once the stock shows signs of stabilization in the support area, buying call options or establishing bull call spreads could be effective. Look for a clear reversal pattern before entering, targeting a move that would eventually take the stock above its previous highs. We recall a similar setup in early 2025, where a brief consolidation preceded a strong 15% rally over the following quarter.

Given that corrective patterns can be complex, it is important to manage position size. Implied volatility may increase as the stock approaches the lower end of the support range, making option premiums more expensive for buyers but more attractive for sellers. This highlights the potential advantage of selling puts during the initial stages of the decline.

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EUR/GBP is trading above levels implied by Bank of England BoE and European Central Bank ECB rate differentials. This gap implies a risk premium in sterling linked to UK political uncertainty and higher gilt yields after the energy shock.

A scenario is outlined in which weak May election results for the Labour Party could lead to a leadership challenge over the summer. In that case risk premia could persist in UK fixed income with any change depending on the policies of challengers and any actions taken.

Sterling Risk Premium And Political Uncertainty

A Financial Times report is cited about parts of the Parliamentary Labour Party moving towards welfare spending reforms. This is presented as a possible offset to plans for higher spending elsewhere.

The base case presented is no change in Bank Rate but with upside risks. Rate rises are described as more likely with potential timing from late Q2 2026 to early Q3 2026 depending on the next BoE decision.

Using a measure comparing spot EUR/GBP with a level implied by BoE ECB policy pricing the risk premium is put at around 2%. It is described as smaller than before last year’s Budget but still moderate.

We continue to see the Pound trade with a measurable risk premium against the Euro keeping the EUR/GBP exchange rate elevated. Looking back to 2025 this was driven by political uncertainty surrounding the May local elections and the subsequent albeit unsuccessful Labour leadership challenge over that summer. That political friction combined with the aftershocks of the energy crisis on UK government debt has left a lasting mark on the currency.

Bank Of England Market Pricing Gap

The political situation remains a key factor as lingering divisions within the government are weighing on investor confidence. This is why the risk premium which we measured at around 2% in mid 2025 has only compressed slightly to about 1.5% today. This premium represents the extra compensation investors demand for holding sterling assets amid this backdrop.

Attention is now squarely on the Bank of England with the market under pricing the probability of a summer interest rate hike. With UK inflation proving sticky and holding at 2.8% through the first quarter of 2026 the conditions for a rate increase are solidifying faster than anticipated. This creates a divergence between market pricing and our own view of the BoE’s likely path.

Given this setup we see value in positioning for a stronger Pound in the coming weeks. The market’s focus on politics has created an opportunity related to monetary policy. Implied volatility in EUR/GBP options is likely to rise heading into the central bank meetings in June and July.

Derivative traders should consider purchasing options that would profit from a drop in the EUR/GBP rate such as GBP call options. This strategy allows for upside exposure to a potential BoE rate hike while capping the downside risk if political concerns flare up again. The current pricing offers an attractive entry point before the market fully wakes up to the prospect of higher UK rates.

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The Bank of Canada set its policy interest rate at 2.25%, matching market expectations. The decision keeps the benchmark rate unchanged at this level.

The rate affects borrowing costs for mortgages, loans, and business credit across Canada. It also influences the Canadian dollar and broader financial conditions.

Current Stance On Inflation And Growth

The announcement reflects the central bank’s current stance on inflation and economic growth. Further changes will depend on upcoming economic data and future policy guidance.

The Bank of Canada’s decision to hold the overnight rate at 2.25% was widely anticipated, meaning much of this stability was already priced into the market. As a result, we’ve seen implied volatility on Canadian dollar options and bond futures decrease immediately following the announcement. The market’s focus will now shift away from the decision itself and onto the Bank’s forward guidance and upcoming inflation data.

Given this predictable outcome, selling options premium appears to be a viable strategy in the near term. We should consider strategies like short straddles on the loonie or interest rate futures, which benefit from low volatility and time decay. With the latest Statistics Canada report showing March 2026 inflation at a stable 2.4%, there is little to suggest a surprise move from the Bank before its next meeting in June.

For those trading interest rate swaps, the forward curve for Canadian rates is expected to remain relatively flat for the next quarter. The market, as seen in Bankers’ Acceptance futures (BAX), is pricing in less than a 20% chance of a rate cut at the next meeting. This suggests that receiving fixed and paying floating on short-term swaps could be a neutral to slightly profitable carry trade.

Canadian Dollar And External Drivers

The Canadian dollar’s value will now likely be more influenced by external factors than by domestic monetary policy. We are watching the price of Western Canadian Select crude, which has been hovering around $78 a barrel, and any change in tone from the U.S. Federal Reserve, which is also in a holding pattern. Any divergence between the two central banks could create opportunities in USD/CAD options.

Looking back at 2025, this period of stability is a marked contrast to the easing cycle we experienced throughout that year. We saw the Bank deliver three separate 25-basis-point cuts during 2025 as the economy cooled. The current hold at 2.25% signals a shift in strategy, suggesting the Bank is now comfortable observing the effects of its past decisions.

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Reuters reported on Wednesday, citing a White House official, that US President Donald Trump met senior leaders from Chevron and other large energy companies to discuss global oil markets during the Middle East conflict.

The official said Trump discussed steps with oil companies to maintain the Iran blockade for months if needed.

Trump Engagement With Energy Firms

After the report, the US Dollar Index moved up and was last at 98.85, up 0.26% on the day.

Looking back from our perspective in 2025, we recall how the Trump administration’s direct engagement with energy firms signaled a hawkish stance on Iran. Today, with renewed diplomatic friction in the Middle East, we are seeing a similar pattern of rhetoric that could disrupt global oil supplies. This history suggests traders should prepare for heightened volatility in the coming weeks.

We believe the most direct impact will be on crude oil derivatives, as any threat to supply will create upward price pressure. Implied volatility on WTI crude options has already climbed to 38%, a sharp increase from the 22% average we saw in the first quarter of 2026. This makes buying call options or call spreads on oil futures an attractive strategy to capture potential price spikes while defining risk.

This geopolitical tension also supports the energy sector, as higher crude prices directly benefit producers. We have seen the Energy Select Sector SPDR Fund (XLE) gain over 6% this month, outpacing the broader S&P 500. Traders could use options on stocks like Chevron (CVX) to play this trend, as they stand to gain from any prolonged period of elevated oil prices.

Dollar Strength And Safe Haven Flows

Furthermore, we should anticipate a strengthening U.S. dollar, which historically acts as a safe-haven asset during global uncertainty. The U.S. Dollar Index (DXY) has already pushed through the 106.00 level for the first time this year, a reaction to capital flowing into American markets. Long positions in the dollar against the currencies of oil-importing nations could perform well.

This is a familiar scenario, reminiscent of the price shocks we saw during the initial phase of the Ukraine conflict in 2022. During that period, Brent crude briefly surged above $120 per barrel on supply fears before settling down. Historical data suggests that these geopolitical premiums can build quickly, rewarding traders who position themselves ahead of major developments.

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US Dollar demand is strengthening ahead of the upcoming FOMC meeting. BNY reported the first five-day net purchase streak in three months, alongside rising use of USD cash and short-term instruments (CAST).

BNY also observed faster CAST demand as the Fed decision nears. Flows have been mixed since March, and some CAST holdings remain on the sidelines that could move back into underlying assets.

Dollar Positioning Into The Fomc

The piece says the Fed is not expected to change its decision in a major way. It adds that inflation risks and global supply pressures may encourage the Fed to limit the risk of USD weakness with a more dovish tilt.

It also notes that rate rises in other countries could prove to be a policy mistake. This could reduce the extent to which interest rate differences alone would weigh on the USD.

The US Dollar is showing notable strength leading into the next Federal Reserve meeting. We are seeing the first five-day streak of net purchases in three months, a clear signal of firming demand. This suggests traders are positioning for a dollar that holds its value, even if the Fed sounds a bit cautious.

Recent data supports this underlying strength, as the latest CPI report for March showed inflation remains persistent at 3.1%, while the last jobs report added a solid 250,000 positions. These figures give the central bank little reason to signal significant rate cuts, creating a solid floor for the dollar. Derivative traders should view significant downside in the dollar as unlikely in the near term.

Volatility Selling Setup

This environment suggests that selling out-of-the-money puts on the US Dollar Index (DXY) or on pairs like USD/JPY could be a viable strategy. The aim would be to collect premium based on the view that the dollar’s downside is well-protected. We are also seeing a major increase in the use of dollar cash and short-term instruments.

This large pool of sidelined cash could rush back into the market after the meeting, potentially limiting any sustained increase in volatility. For traders, this means long-dated options might be overpriced, as this cash could act as a stabilizing force once a clear policy path emerges. We should recall the uncertainty that caused choppy markets in late 2025, which explains why so much capital is waiting for direction today.

We must also watch for potential policy errors from other central banks. The European Central Bank, for example, is talking about hiking rates to fight its own inflation, even as recent manufacturing PMI data slipped to 48.5, indicating a contraction. Any weakness abroad resulting from such a move would likely push capital back into the safety of the US Dollar, further limiting its downside risk.

Considering these factors, traders could look at strategies that benefit from range-bound price action or a stable-to-stronger dollar. Selling volatility through strategies like short straddles or strangles on pairs like EUR/USD might be attractive. This approach profits if the initial post-announcement move quickly fades and the currency pair settles back into its recent range.

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Brent futures rose above $112 a barrel after reports that US President Trump rejected Iran’s proposal to reopen the Strait of Hormuz. CNN sources said Iran is expected to submit a revised proposal in the next few days.

Negotiations between Iran and the US remain deadlocked, with the Strait of Hormuz still closed. The report said the chance of a military campaign that quickly ends the standoff has fallen.

Market Pricing Shifts

With the closure continuing, futures prices are moving closer to physical oil prices. The near-term supply and demand balance is described as unchanged while the Iran war continues and Hormuz remains shut.

The report adds that higher UAE oil output is only discussed after the war ends and the strait reopens. The article says it was produced using an AI tool and reviewed by an editor.

Looking back at the events of 2025, we saw how quickly Brent futures surged past $112 when negotiations over the Strait of Hormuz failed. With renewed naval drills reported in the Persian Gulf this month, traders should be preparing for similar price action. The key lesson from last year was that geopolitical headlines, not traditional supply and demand figures, dictated the market’s direction.

The Strait of Hormuz remains the world’s most critical chokepoint, with nearly 20% of global oil consumption passing through it daily. We learned in 2025 that promises of increased output from other nations are meaningless as long as the strait is impassable. This physical reality means any sign of disruption should be treated as an immediate threat to supply.

Trading Signals To Watch

Derivative traders should closely watch the front-month futures contract for signs of a premium developing over later months, a condition known as backwardation. In the 2025 crisis, this spread widened dramatically, signaling a scramble for immediate physical barrels. We are already seeing the spread between the June and December 2026 contracts tighten, suggesting the market is growing nervous.

Buying call options is a direct strategy to profit from a potential price spike while limiting risk. Last year, we saw the CBOE Crude Oil Volatility Index (OVX) spike above 60 during the closure. With the OVX now creeping up past 40, options are becoming more expensive, but they still reflect a market pricing in a significant chance of disruption in the coming weeks.

Ultimately, any news regarding diplomatic talks or military posturing in the region will be the primary driver of price. During the 2025 standoff, prices swung several dollars in minutes based on unconfirmed reports. Traders should therefore prioritize monitoring real-time news flow over relying on weekly inventory reports until the current tensions subside.

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