Gold Bears Grow Weary as Options Ratio Drops to Three-Year Low

  • Gold ETF put-to-call ratio seen at lowest since 2012
  • Bullion has room to move higher on delayed rate hike: Samana

Gold bears are finally showing signs of fatigue, if options trading is any indication.

The put-to-call ratio, or the number of bearish options trading compared with bullish ones, for SPDR Gold Shares is at the lowest since 2012, data compiled by Bloomberg show. The open interest on puts fell to the lowest since mid-July on Sept. 21, signaling bears may be losing their stranglehold on the market. SPDR is the world’s biggest exchange-traded product backed by gold.

SPDR put-to-call ratio falls
SPDR put-to-call ratio falls

The drop comes two months after bullion slumped to a five-year low. Prices have rebounded about 7 percent since then as tepid global growth prompted the Federal Reserve to hold off on raising interest rates. Higher rates curb the appeal of the metal, which doesn’t offer yields, unlike other competing assets.

“Some folks are starting to really worry about whether the Fed rates will raise rates this year,” said Sameer Samana, a St. Louis-based global quantitative strategist at Wells Fargo Investment Institute, which oversees $1.6 trillion. “You probably got a little bit of room for gold to stage a counter-trend move higher,” if the rate increase gets pushed out to December or next year, he said.

Gold is still heading for a third straight annual loss. Investors had been dumping the metal in anticipation of monetary tightening. Fed fund futures show traders now see a 41 percent chance of a rate increase in December, compared with 64 percent on Sept. 16, the day before the Fed announced its decision.

December gold futures on the Comex in New York rose as much as 2.2 percent on Thursday, helping boost shares of mining companies. The benchmark 30-member Philadelphia Stock Exchange Gold and Silver Index of the largest producers rose as much as 7.6 percent.

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