Gold’s one-month risk reversal, which measures the spread between call and put prices, fell to -1.80 on Friday – the lowest level since March 2020 – extending the decline from the Feb. 1 high of 1.60, indicating increased demand for put options.
A put option gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date.
Therefore, one-month risk reversal’s drop to lowest since March suggests investors are adding bets to position for weakness in the yellow metal.
Gold faced selling pressure last week and fell by over 2.8% to $1,717 per ounce, the lowest since June 2020, as the US Treasury yields spiked.
At press time, the metal is trading near $1,748.
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