Gold prices have stabilized below $4,000 after falling 1.59%, the largest drop since mid-August. This decline is due to easing geopolitical tensions, particularly following a peace deal between Israel and Hamas, which reduced the need for safe-haven assets like gold. Currently, gold is holding steady around $3,985 as it faces challenges breaking past the $4,000 mark. The recent drop is attributed to profit-taking and reduced geopolitical fears, but the overall upward trend is supported by ongoing economic uncertainty and a dovish outlook from the Federal Reserve.

Persistent Global Risks and Central Bank Buying

Ongoing global risks, such as the Russia-Ukraine conflict and concerns about a U.S. government shutdown, continue to boost gold’s appeal. Additionally, buying by central banks and inflows into gold-backed ETFs help sustain its rally, which is now aiming for its eighth consecutive weekly gain. The October US Consumer Sentiment Index dipped slightly from September, with the inflation outlook stable. Despite a weaker US Dollar, gold faces difficulty recovering from its recent fall. The US Dollar Index is nearing two-month highs, showing its strongest weekly gain this year. Gold is trying to bounce back after testing the $3,950 support level, meeting resistance around $3,995 to $4,000. If it can maintain gains, it may hit new highs, but failing to break through $4,000 could lead to a pullback. The Relative Strength Index suggests a neutral position, allowing for mixed market movements. Gold is currently sending mixed signals, remaining under the crucial $4,000 level. The recent peace deal triggered a steep drop but a dovish Fed coupled with high government debt points towards potential price increases. This situation provides specific opportunities for derivative traders in the weeks ahead.

Strategies for Traders and Investors

For those who view this as a temporary drop, purchasing call options is a sound strategy. With implied volatility decreasing after the recent news, entry prices have become more attractive for betting on a return above the all-time high. The CME FedWatch tool indicates there’s over a 90% chance of a rate cut in November 2025, likely fueling another rally. If gold maintains a range while the market processes recent events, selling volatility could be effective. Implementing an iron condor with short strikes outside the $3,900 to $4,100 range might be profitable in the upcoming weeks. This strategy benefits from stable prices and the passage of time. However, we cannot overlook the strong US Dollar, currently around 99.35 on the DXY, its highest since early August 2025. If the dollar continues to strengthen or if the government shutdown ends sooner than expected, buying put options below the $3,950 support level can provide a chance to profit from a deeper correction. This strategy also serves as a hedge for those holding physical gold or long futures. Underlying demand is a significant force, indicating that buying on dips remains the preferred long-term strategy. Central banks have already added over 800 tonnes to reserves this year, continuing the potent purchasing trend seen in 2022 and 2023. After steady outflows for much of 2024, gold-backed ETF inflows have also turned positive this quarter, adding further support. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now