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Gold risk reversals hit 3-month low as markets favor put options

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  • Gold fell to $1,245 yesterday – the lowest level since December 2017.
  • Falling gold risk reversals show rising demand for gold puts.

Gold (XAU/USD) fell to $1,245 – the lowest level since December 2017 and looks set to extend losses further towards $1,235 (50-month moving average).

The sharp drop in gold prices has boosted demand for XAU puts (bearish bets on gold), as indicated by risk reversals.

The one-month 25 delta risk reversals (XAU1MRR) fell to -0.35 today, indicating a rising implied volatility premium for XAU puts (rising demand for XAU puts). The gauge stood at 1.13 on June 14, representing a stronger demand for XAU calls.

XAU1MRR

 

 

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