London: For all the talk of faster inflation, gold traders are pricing in a relatively calm market.
Wagers on volatility in the precious metal are near a two-year low, diverging from a gauge of inflation bets by the most since September 2014. With the Federal Reserve tightening its policy and the US dollar hovering around its strongest in more than a decade, investors have been shunning bullion, sending US holdings to an eight-month low.
“Inflation expectations are clearly picking up,” said Brad Yates, the head of trading for Elemetal, one of the biggest US gold refiners. “But the opposing force is that the Fed is fundamentally more likely to raise rates at any given meeting than they are to lower them. So it’s up to everyone’s view of those two curves as to where real rates are going over the course of this year.”
Caught between two forces, investors are holding off placing big bets on the metal, sending the cost of gold options lower.
