**Gold Faces Resistance Despite Safe-Haven Demand** The US Federal Reserve’s tough approach has strengthened the US Dollar, making it harder for gold prices to rise. Additionally, the positive mood in equity markets might limit gold’s price increases. For a sustained recovery beyond last week’s lows, gold needs to break the $4,045-4,050 resistance level. US President Trump announced that Nvidia’s AI chip would face restrictions, which dampens some optimism from easing US-China trade tensions and supports gold. Meanwhile, concerns about the ongoing US government shutdown are raising fears of economic damage, increasing gold’s appeal as a safe-haven asset. Recently, the Fed cut rates by 25 basis points but indicated that there won’t be more cuts soon, keeping the US Dollar strong. Traders are now turning their attention to upcoming US economic data and speeches from Federal Reserve members, which could influence gold prices and their resistance levels. Gold is struggling to rise, even with some safe-haven buying during the day. The ongoing tensions over US restrictions on AI hardware to China provide a consistent, slight uplift to the precious metal. This geopolitical tension is expected to keep supporting gold prices during any significant declines. The strong US Dollar, bolstered by the Fed’s tough stance, has kept gold’s prices in check. Throughout 2024 and 2025, the Fed maintained steady rates, making the Dollar more attractive and limiting gold’s potential. This strength in the Dollar acts as a key obstacle, making it costly for traders to invest heavily in non-yielding assets like gold in the coming weeks. **Economic Strain Could Challenge the Fed’s Position** We are also noticing signs of strain in the US economy that might complicate the Fed’s position. The ISM Manufacturing PMI has shown weakness for several months, with late 2024 data indicating a contraction in manufacturing. These economic risks, reminiscent of past concerns during government shutdowns, enhance gold’s appeal as a safe investment. One strong underlying support for gold has been the consistent buying from central banks. This trend has significantly accelerated in 2023 and 2024, with banks adding hundreds of tonnes to diversify away from the dollar. This institutional demand helps create a strong price floor for gold, suggesting that any major drop in price will attract significant buyers. For derivative traders, this environment suggests volatility rather than a clear trend. The conflict between a strong Dollar and high safe-haven demand indicates that we may see a choppy, range-bound market in the coming weeks. Strategies that capitalize on this volatility, such as buying straddles or strangles, may be more effective than waiting for a clear breakout. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now