Gold is currently priced around $3,950 per troy ounce, after breaking a four-day losing streak. Strong purchases by central banks and increased inflows into exchange-traded funds (ETFs) have tightened the supply of gold in both official and exchange markets. Federal Reserve Chair Jerome Powell has indicated uncertainty about a rate cut in December. This has pushed 10-year Treasury yields above 4%, raising the cost of holding gold, which does not yield interest. While the Fed announced a 25 basis point interest rate cut, the overall economic outlook has not changed.

Fed Easing and Gold Pressure

The Fed intends to reduce its Quantitative Easing (QE) by transitioning its mortgage-backed assets to long-term Treasuries by December 1. Gold is facing pressure due to expectations of rising yields and a stronger US Dollar (USD). Gold also encounters challenges as market sentiment improves, fueled by optimism for a potential trade deal between the U.S. and China. Presidents Trump and Xi Jinping are expected to meet soon in South Korea. Gold is considered a safe-haven asset and a hedge against inflation. Central banks are the largest holders of gold, purchasing 1,136 tonnes valued at $70 billion in 2022. The price of gold often moves inversely to the US Dollar and Treasury yields, influenced by global events and interest rates. Gold remains steady around the $3,950 mark after recent losses, presenting a crucial moment for traders. Strong support from central bank buying and ETF inflows clashes with a cautious Fed. This situation indicates that while the price floor is firm, there is strong resistance at higher levels.

Implications of Treasury Yields

The recent interest rate cut by the Fed, accompanied by comments that raise doubts about a December cut, have pushed the 10-year Treasury yield back above 4%. Since gold offers no yield, this situation creates a significant challenge, raising the cost of holding the metal. Traders should approach price increases toward the $4,000 level with caution, as higher yields may limit advances. To support ongoing buying activity, recent data from the World Gold Council for Q3 2025 shows that central banks purchased another 280 tonnes, continuing the strong trend from 2022. Additionally, major exchanges report that global gold ETFs experienced net inflows of over $2 billion in October 2025, reversing the outflows seen earlier in the year. This physical demand acts as a buffer against the Fed’s tightening measures. Reflecting back on the volatility during the US-China trade talks in the late 2010s shows that geopolitical factors can easily overshadow monetary policy issues, creating opportunities for sharp price movements. New geopolitical uncertainties could trigger another price rally, even in the current interest rate environment. Given this complex situation, using options strategies may be beneficial in the coming weeks. Implied volatility is likely to remain high, making strategies like selling premium through covered calls against physical gold holdings or using bear call spreads appealing for those who believe upside potential is limited. Conversely, traders expecting a decline below key support levels might consider buying puts as a cost-effective way to prepare for a downturn driven by rising yields. Create your live VT Markets account and start trading now.

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