US monetary policy exerts a strong influence on the skewness of currency, gold and silver options. In a normal monetary environment where short-term interest rates are well above zero, investors tend to be more concerned about gold and silver prices rising abruptly than falling. As a result, out-of-the-money (OTM) calls on the metals tend to cost more than OTM puts. By contrast, during the long period of near-zero rates, especially the Federal Reserve’s (Fed) second and third phases of quantitative easing (QE), gold and silver options skewed the opposite way: OTM puts cost more than OTM calls (Fig.1 and 2).
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