One-month risk reversals on gold, a guage of calls to puts, has dropped to -0.725 to hit the lowest level since April 22, according to data source Reuters.
A negative risk reversal is the result of put options drawing stronger demand than calls or bullish bets. As such, the decline in gold’s risk reversal represents increased demand for put options or bearish bets. In other words, investors are adding bets to position for weakness in the yellow metal.
The guage topped out at 1.35 on Nov. 6 and has been falling ever since. Gold dived below the long-held support of $1,850 earlier this week and is currently trading near $1,804, representing a 0.13% drop on the day.
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