Gold Price Influences

Gold is a popular asset because it has always been a reliable store of value and means of exchange. Besides being used in jewelry, gold is seen as a safe investment during tough times and helps protect against inflation. Central banks are the largest buyers, adding 1,136 tonnes to their reserves in 2022. They aim to strengthen their economies and currencies, with countries like China, India, and Turkey significantly increasing their gold holdings. Today, October 27, 2025, gold prices have dipped slightly. This drop is mainly due to a strong US Dollar. The Federal Reserve’s ongoing “higher for longer” interest rate approach is making the dollar more appealing than gold, which does not earn interest. However, this temporary pressure might offer chances for traders who believe in gold’s long-term potential. Despite daily price changes, mixed economic signals create uncertainty. High interest rates exist alongside persistent global inflation, which remains over 3% in many developed countries. This inflation supports gold’s role as a hedge. Additionally, lowered global growth expectations for 2026 are sparking fears of recession, typically boosting demand for safe-haven assets like gold.

Market Volatility and Strategies

It’s important to recognize the support being built by central banks that continue purchasing gold aggressively. Following record high acquisitions in 2022 and 2023, central banks added over 250 tonnes in just the third quarter of 2025. This ongoing demand indicates that significant price drops are likely to be seen as buying opportunities by major organizations. With this context, we can expect increased volatility in the coming weeks. The CBOE Volatility Index (VIX) has been around 22, which is much higher than its historical average, indicating jitters in the stock markets. For derivative traders, this situation is an excellent setup for strategies like buying call options to prepare for possible spikes due to geopolitical news, or using collar strategies to guard against losses from any hawkish news from the Fed. The relationship between gold and the US Dollar will be a key factor to monitor. If there is any data showing a weakening US economy or signals from officials in the upcoming November FOMC meeting suggesting potential rate cuts in mid-2026, it could lead to a quick drop in the dollar. Such a scenario would likely boost gold prices as we approach the end of the year. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now