The WGC note options activity is indicating gold may rise

In the selloff over the past week, however, we have seen the put skew decrease or ‘cheapen’, suggesting investors may be selling out-of-the-money puts, in lieu of downside puts to take advantage of the recent increase in implied volatility, as the ATM put prices will likely be more sensitive to price and volatility changes”.

In layman’s terms, this means when there is a price move lower if traders and investors want to protect their downside they would buy puts.

He added “By the same token, while implied volatility has risen so, it has so far only done so slightly, moving up about one volatility point to a level of 16 .

Lastly, on ETF flow Perlaky said “we have seen positive gold-backed ETF inflows, even as the gold price sold off sharply last week.

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