Gold prices are struggling to break above the $4,045 resistance level, despite attempts to bounce back from lows below $3,900. The strength of the US Dollar, boosted by the Federal Reserve’s recent actions, is impacting gold’s recovery, making the $3,900 support level vulnerable. Overall, gold faces challenges as the US Dollar gains ground, supported by the Fed’s policies. After last week’s rate cuts, Chairman Powell also expressed caution and discouraged expectations for monetary easing, which boosted US treasury yields and the Dollar.

Mixed Technical Outlook

Technical analysis suggests a mixed scenario. The 4-hour Relative Strength Index (RSI) is around 50, indicating a stagnant market. The inability of bulls to break past the resistance of $4,030 to $4,045 puts the $3,900 support level at risk. If gold surpasses $4,045, bearish pressure could lessen, shifting attention to the $4,150 area. Conversely, a drop below $3,890 may redirect focus to October 2’s low around $3,820. Gold is seen as a safe-haven investment and a hedge against inflation, with central banks being the largest buyers to boost economic confidence. Gold typically moves inversely to the USD and Treasuries, rising when interest rates are low and geopolitical tensions are high, while higher rates tend to push its value down. With gold trading close to $4,000, the immediate outlook is neutral. The market is caught between key resistance at $4,045 and solid support around $3,900. This narrow range suggests that options traders might explore strategies that benefit from low volatility, while being prepared for a potential breakout.

Influence of the US Dollar

The main challenge for gold is the strong US Dollar, influenced by the Fed’s recent hawkish tone. A similar pattern occurred in late 2023 when the Fed indicated higher rates would stick, capping gold’s growth. With the latest October inflation figures stubbornly high at 3.8%, Chairman Powell’s caution against expecting another rate cut in December is significant. Adding to the pressure, US 10-year Treasury yields remain steady at 4.9%, making non-yielding gold less appealing to investors. Today’s unexpected strong manufacturing data supports a robust economy, which could postpone any easing by the Fed. These factors indicate that reaching the $4,045 resistance level may encounter substantial selling pressure. Traders looking to take advantage of this uncertainty might consider selling options strangles with strike prices outside the $3,900-$4,045 range. The neutral RSI reading supports this view of a temporarily stalled market, but protective stops should be placed just beyond these crucial levels to guard against a sudden price movement. A bearish strategy could involve waiting for a clear break below the $3,890 support. A confirmed move past this level might lead to further selling, allowing traders to open short futures positions or buy put options. The initial target for this strategy would be the support area around $3,820. On the other hand, a bullish approach requires patience and a clear sign that Dollar strength is declining. A sustained move above $4,045 would signal that bearish pressure is easing and create an opportunity to buy call options. The first target on the upside would then be the $4,150 resistance zone. Despite these short-term challenges, it’s important to recognize the strong underlying support for gold. Data from the World Gold Council for the third quarter of 2025 shows that central banks, especially from emerging markets, are continuing to buy aggressively. This steady demand sets a long-term price floor, suggesting caution against overly bearish positions. Create your live VT Markets account and start trading now.

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