- Gold risk reversals show strongest bullish bias in 7.5-weeks.
- The yellow metal seems to have lost its mojo in the last few days, despite the risk aversion.
Bullish bets or call options on gold are drawing bids, according to risk reversals, a gauge of calls to puts on the safe-haven metal.
One-month risk reversals (XAU1MRR) rose to 2.725 on Thursday to hit the highest level since Jan. 6, having bottomed out at 0.85 on Feb. 12.
The near-90 degree surge seen over the last two weeks indicates a rise in demand or implied volatility premium for call options – a sign investors are expecting gold to rise on coronavirus-led risk aversion in the equities and are adding bets to position for gains in the yellow metal.
However, while risk reversals are gaining altitude, the spot price is struggling. Gold hit a high of seven-year high of $1,689 on Monday and fell back to $1,625 on Wednesday. At press time, the safe-haven metal is changing hands at $1,642 per Oz.
Gold isn’t finding takers in Asia despite the overnight drop in the US equities and the losses in the Asian stocks. The Dow Jones Industrial Average fell by over 1,200 points on Thursday, confirming its worst four-day losing streak since the 2008 financial crisis. Meanwhile, at press time, major Asian indices like Nikkie, Hang Seng, Kospi, and the Shanghai Composite are down 3% to 4.3%.
XAU1MRR
Technical levels
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