- Gold (XAU/USD) risk reversals turned negative as prices dropped below $1,300.
- Negative risk reversals indicate increased demand for put options (bearish bets).
Gold one-month 25 delta risk reversals (XAU1MRR) fell into negative on Wednesday for the first time since March 22, indicating the implied volatility premium for puts is higher than that of XAU calls, i.e. puts are in demand.
As of writing, the risk reversals gauge was seen at -0.20 vs -0.225 yesterday and 2.2 on April 18.
The drop from +2.2 to -0.20 indicates the options market has turned bearish on the yellow metal, meaning the investors are expecting a deeper sell-off in the yellow metal and hence are hedging (preparing) for the same via long put positions.
The technical charts do indicate scope for a sell-off to $1,240.
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 securities. 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 Forex 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.