Gold Price Tempts BofAML to Wager on Short-Term Bullish Options

(Bloomberg) -- The burgeoning interest in gold has reached Wall Street, with Bank of America Merrill Lynch strategists backing bullish options linked to the precious metal.

A negative view on the dollar, large short positions in gold futures and investor demand for portfolio protection are some of the reasons behind the call, investment strategists including James Barty wrote in a note on Friday.

“The current environment is one where the precious metal is regaining its prominence as a portfolio hedge and has value now,” they said. “The market is currently very short gold futures and the likelihood of a relatively less hawkish Fed into year end and 2019 can prop up non-dollar crosses and increase the value of gold.”

The strategists have a short-term view on a potential gold rally -- they’re long call options on the SPDR Gold Shares exchange-traded fund expiring in January, according to the note. The strike price was $117, compared to Friday’s close of $116.01.

The yellow metal has risen about 3 percent this month, after six straight months of declines that’s left it down almost 6 percent year-to-date. Hedge funds and other large speculators reduced bearish bets on gold by the most since March, according to the latest data from the Commodity Futures Trading Commission.

To contact the reporter on this story: Cormac Mullen in Tokyo at cmullen9@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Ravil Shirodkar

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