Gold prices fell by 2% after hitting a record high of $4,379. This drop came after US President Donald Trump spoke about the issues with high tariffs on China, which led to a better risk appetite and higher US Treasury yields. The yield on the US 10-year Treasury increased by nearly three basis points, putting pressure on gold and other non-yielding assets. Meanwhile, the Federal Reserve is still targeting a 2% inflation rate, and market watchers are eager for the Consumer Price Index (CPI) report coming out next week.

US Dollar and Gold Prices

The US Dollar gained a bit, which also contributed to the decline in gold prices. Nonetheless, gold has had a strong year because of geopolitical tensions and increased purchases by central banks. Standard Chartered Bank predicts that gold will average $4,488 in 2026. Despite the recent dip, the technical outlook for gold remains positive. Key resistance levels are $4,300, $4,350, and $4,389, while support is at $4,200. Central banks are important buyers of gold, accumulating reserves to strengthen their currencies. The price of gold is affected by geopolitical risks, interest rates, and the performance of the US Dollar. The recent 2% drop from the record high is largely due to easing tensions between the US and China and rising Treasury yields. This situation has created short-term challenges, pushing gold down from around $4,380. Currently, it seems likely that prices will continue to decline as the dollar gains strength. As we approach the inflation report next week, it might be wise to consider buying put options to protect our long-term investments. If prices fall below the $4,200 support level, we could see a quicker drop toward the low of $4,185 from October 17th. This strategy will help shield us from any potential rise in yields if inflation comes in higher than expected.

Price Stability and Market Trends

Recent data highlights the market’s keen interest in the upcoming CPI report. The September CPI report showed core inflation steady at 3.1% year-over-year, significantly above the Fed’s 2% target. This persistence in prices complicates the Fed’s ability to cut rates as rapidly as the market would like. Even with this recent decline, the reasons behind gold’s impressive 62% growth in 2025 are still valid. The trend of de-dollarization is ongoing, with the People’s Bank of China and others adding another 250 tonnes to their reserves in the third quarter of 2025. This sustained buying provides a solid foundation against significant price drops. Thus, this dip could be a good chance to buy longer-dated call options at a lower price, targeting strikes above $4,300. The ongoing geopolitical risks and central bank demand remain strong, so it’s important to keep that in mind. Historically, we saw a similar scenario in 2023 when gold consolidated for months before breaking out. Even with the Fed keeping rates high during that time, lasting demand ultimately pushed prices to new highs. This suggests that patience could pay off once this current dip settles. Create your live VT Markets account and start trading now.

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