Risk reversals still looking for weaker gold

• Gold has dropped 8 percent in the since early April.
• However, risk reversals still show rising demand for XAU put options (bearish bets), i.e. investors are likely expecting a further drop in prices.

Gold fell to 2018 low of $1,352 yesterday and was last seen trading at $1,255 - down more than 8 percent from the April high of $1,366.

The 14-day relative strength index (RSI) shows oversold conditions. However, investors are likely expecting the sell-off to continue, the risk reversals indicate.

The one-month 25 delta risk reversals fell to -0.275 yesterday - the lowest level since May 21, indicating the implied volatility premium for put options is higher than the implied volatility premium for calls.

Simply put, the demand for put options continues to rise.