Gold prices in India dropped on Tuesday. A gram now costs 11,266.84 Indian Rupees (INR), down from 11,303.79 INR the day before. The price per tola fell from INR 131,845.20 to INR 131,412.10. The US Federal Reserve’s anticipated interest rate cuts are keeping the US Dollar low, which helps gold recover from a two-week low. Traders expect a 25-basis-point rate cut during an upcoming two-day meeting, aided by US inflation data showing a 3% year-over-year rise in September.

Geopolitical Tensions and Market Optimism

Geopolitical tensions remain high. US President Trump noted a nuclear submarine near Russia after Russian President Putin announced a missile test. On the other hand, easing trade tensions between the US and China are boosting market optimism, which could affect gold’s status as a safe-haven asset. In 2022, central banks, major gold holders, increased their reserves by 1,136 tonnes, the highest annual purchase on record. Gold prices usually rise when the US Dollar is weak and interest rates are low, serving as a hedge against inflation and currency decline. Prices are influenced by geopolitical instability, economic concerns, and central bank monetary policies. Gold showed a slight pullback today, October 28, 2025, marking a different landscape for traders compared to years past. Unlike previous expectations of Federal Reserve rate cuts, the market now deals with stubborn inflation. The latest US Consumer Price Index data from September 2025 showed core inflation at 3.4%, keeping the Fed cautious and limiting gold’s potential for gain. This differs significantly from late 2023 and 2024, when rate cuts were expected, weakening the dollar and boosting precious metals. Currently, the CME FedWatch Tool shows only a 15% chance of a rate cut in the next six months, a sharp change from previous years. This environment of persistently high rates is strengthening the US Dollar, with the DXY index remaining above 106.

Opportunities and Risks for Gold Traders

For derivative traders, this situation creates both complexity and opportunities. A strong dollar and high interest rates pose downside risks for gold, making put options or short futures contracts appealing for bearish strategies. Traders are buying puts with strike prices around $2,450 per ounce to hedge against a more aggressive central bank. However, there is still strong support for gold due to ongoing geopolitical tensions in the Middle East and Eastern Europe. This ongoing risk creates a safety net for prices, as any escalation could lead to a rush for safety. We saw similar safe-haven buying during the early days of the Russia-Ukraine conflict in 2022, which temporarily insulated gold from rising rates. Additionally, central bank demand remains significant, mirroring trends from the early 2020s. The latest World Gold Council report for Q3 2025 revealed that central banks from emerging markets bought another 250 tonnes, indicating a continued move away from the dollar. This steady demand can help absorb some selling pressure from financial markets. With these mixed influences, implied volatility is increasing. The CBOE Gold Volatility Index (GVZ) has risen over 18% in the past month, suggesting the options market is anticipating larger price swings soon. This scenario indicates that strategies like long straddles or strangles could be advantageous for predicting significant price movements, even if the direction is uncertain. In summary, the current setup suggests range-bound trading with a high likelihood of sharp breakouts. Traders should consider using options to manage risk, such as bull call spreads to capitalize on a potential geopolitical rally or bear put spreads to navigate the hawkish Fed narrative. This approach allows participation in potential market movements while limiting losses if prices remain stuck between these strong opposing forces. Create your live VT Markets account and start trading now.

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