- Demand for gold call options has weakened over the last four weeks, risk reversals indicate.
- One-year risk reversals have dropped to multi-month lows despite coronavirus fears.
Gold one-year risk reversals, a gauge of calls to puts on the yellow metal and a barometer of positioning and sentiment, fell to the lowest level in eight months on Monday, indicating a weakening of demand for the call options or bullish bets.
The risk reversals declined to 3.125, a level last seen on June 21, having topped out at 4.425 in the first week of January, when the US-Iran tensions had triggered a flight to safety and put a haven bid under gold.
The yellow metal is currently trading at $1,570, having hit a high of $1,611 on Jan. 8. The markets have been recently roiled by coronavirus and fears of a sharp slowdown in China's economy.
So far, however, that has failed to invite stronger demand for call options on gold, as indicated by the slide in the risk reversals.
A call option gives the holder a right but not the obligation to buy assets at an agreed price on or before a particular date. A put option is the right to sell.
A negative risk reversal indicates the premium claimed by puts (or demand) is higher than that for calls.
- FXstreet Indonesian Site - new domain! Access it ad www.fxstreet-id.com
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.