Gold recovers by $10 from session lows as put demand weakens

• Gold is regaining poise with options market suggesting a weakening of demand for puts. 
• Friday's engulfing pattern has made Monday's close pivotal.

Gold is trimming gains with the options market signaling a weakening of demand for the put options or bearish bets. 

The yellow metal is currently trading at $1,495 per Oz, representing a 0.30% loss on the day, having printed a session low of $1,483 in early Asia. 

Investors sold gold with the Asian stocks early Monday as fears of a coronavirus-led recession were bolstered by the US Senate's failure to advance the coronavirus rescue package. 

Risk reversals recover from five-year lows

One-month risk reversals, a gauge of calls to puts, rose to -1.70 on Friday from Thursday's print of -4.5.

The sharp uptick represents a weakening of demand or a drop in the implied volatility premium for the put options. The metal looks to have found a temporary bottom if the options market data is anything to go by.

Focus on Monday's close

Gold carved out a bullish engulfing candle on Friday, validating the oversold conditions signaled by the 14-day relative strength index and making Monday's close pivotal.

A close above Friday's high of $1,516 would confirm a bullish reversal candlestick pattern and open the doors for a notable recovery rally. Alternatively, a close under Friday's low of $1,455.

Technical levels