Wagers betting that gold prices will rally 141 percent in about two years were the most-traded option in New York bullion yesterday.
Call options giving owners the right to buy gold at $3,000 an ounce by December 2015 traded 7,250 contracts yesterday on the Comex in New York, more than double the amount of the next most-active option, data compiled by Bloomberg show. Futures for December delivery slumped 1.1 percent to $1,243.60 on the Comex in New York today. Prices reached a record $1,923.60 in September 2011.
Bullion has tumbled 26 percent in 2013 as signs of economic recovery spurred speculation that the Federal Reserve will start to cut its monthly bond buying, strengthening the dollar. Global demand for the precious metal fell 21 percent in the third quarter as investors continued to dump holdings through exchange-traded funds and central banks slowed purchases, the World Gold Council said.
“This looks like a trade with a bank on one side and a very bullish investor buying a lottery ticket on the other,” James Cordier, founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “It’s a big bet.”
Each option contract gives the right to buy 100 ounces of gold.