**Gold Faces Pressure from Political Stalemate** Gold is showing signs of being overbought, as indicated by the Relative Strength Index, which limits new bullish investments. However, recent rebounds signal a positive outlook in the short term. Key support levels are between $3,825 and $3,820, with potential declines towards $3,700 if selling continues. The overall market sentiment—switching between risk-on and risk-off—affects major currency and commodity trends. Currently, gold is stuck below its record highs and is navigating mixed market signals. A positive trend in equity markets, marked by a decrease in the VIX to about 14, is limiting gold’s immediate gains. Still, the overall trend appears bullish, suggesting this quiet phase might lead to another upward movement. **Dovish Federal Reserve Outlook** Gold’s primary support stems from expectations of a dovish Federal Reserve. Following last month’s disappointing ADP employment report, which indicated a job loss in September 2025, the market is now anticipating two more rate cuts this year, according to the CME FedWatch tool. This outlook keeps the US Dollar weak, making gold, which does not yield interest, more appealing. For traders in derivatives, this situation presents an opportunity to prepare for continued strength while managing risk. Dips towards $3,820 could be seen as a chance to buy call options or create bull call spreads, which could profit from a rebound while reducing the initial investment. Selling cash-secured puts near the strong $3,800 support level is another strategy. This approach allows buyers to acquire gold at a lower price or collect premiums if prices remain above that threshold. Geopolitical tensions are providing steady support for gold prices, reducing the likelihood of a sharp decline. Continued US backing for Ukrainian strikes on Russian targets means sudden risk-off events could happen at any time. This situation keeps safe-haven demand for gold strong, so caution is advised for those looking to short the metal aggressively. We should also monitor how the weak dollar influences other asset classes in the coming weeks. For example, the Australian Dollar has recently reached a three-month high against the US Dollar, indicating increased risk appetite in commodities. This trend supports the case for a weak US Dollar, which is likely to benefit gold significantly. Create your live VT Markets account and start trading now.

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