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  • Risk reversals indicate rising demand for gold put options.  

Gold (XAU/USD) fell to $1,284.50 on Thursday – the lowest level since Dec. 27 and was last seen trading at $1,289 amid rising Treasury yields.

The yellow metal is down 2.78 percent from the last Friday’s high of $1,326 and has revived interest in the gold put options (bearish bets), the risk reversals indicate.

The one month 25 delta risk reversals (XAU1MRR) fell to -0.25 today – the highest level since March 22. Note, the risk reversals stood at 0.68 on May 11 and 2.20 on April 18. The drop into the negative territory indicates the implied volatility premium for gold puts (bearish bets) is higher than the implied volatility premium for gold calls (bullish bets).

Clearly, the options market has turned bearish indicating the investors expect a deeper sell-off in the yellow metal.

Gold Technical Levels

Major support is seen at $1,277 (100-week MA), $1,261 (October 2017 low), while resistance is lined up at $1,296 (50-week MA) and $1,300 (psychological level).