Gold risk reversals hit highest since 2011 on call demand

Risk reversals on gold (XAU/USD), a gauge of calls to puts on the yellow metal, rose to their highest level since September 2011 on Monday, indicating investors are adding bets to position for further strength prolonged strength in the safe-haven metal. 

One-year risk reversals (XAU1YRR) rose to 2.575 in favor of XAU calls. The positive number indicates the demand or implied volatility premium for calls options (bullish bets) is higher than that for put options. 

The yellow metal jumped to $1,348 on Friday, the highest level since April 2018. As of writing, it is trading at $1,330 per Oz. 

Prices rallied from $1,269 to $1,348 in the last three weeks as markets pull forward expectations of Fed rate cuts. The Fed funds futures are currently pricing three rate cuts for 2019. 

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