Gold hits 12-day low, revives interest in put options (bearish bets)
|- Gold's price fell to 12-day lows in the overnight trade, signaling an end of the corrective bounce from $1,196.
- The price drop seems to have revived interest in put options.
Gold fell to $1,212 in the overnight trade - a level last seen on Nov. 16 - as the greenback picked up a bid on hawkish comments by Fed's Vice Chair Clarida.
Notably, the drop to 12-day lows indicates the corrective bounce from the Nov. 13 low of $1,196 has likely ended at $1,230 and the bears have regained control.
Adding credence to that view is the rise in implied volatility premium for the XAU put options. As of writing, the XAU/USD three-month 25 delta risk reversals are trading at -0.125 in favor of puts vs 0.325 in favor of calls seen on Nov. 26
The negative reading indicates the implied volatility premium (or demand) for put options is more than that for calls.
So, it seems safe to say that the options market has turned bearish on the yellow metal. In other words, investors are likely expecting a deeper drop in gold and hence are buying downside protection.
XAU3MRR
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.