Gold prices are currently supported around $4,040 but are having a tough time breaking past $4,100. After reaching monthly highs near $4,250, gold has pulled back and is now trading below $4,100 as investors wait for delayed US economic data. Trading in the Asian and European sessions has been uneven, influenced by strong remarks from Federal Reserve officials, which have boosted the US Dollar. Many traders are eager for the upcoming US macroeconomic data to better understand the economy and Fed policies.

Technical Analysis

From a technical standpoint, gold is showing a moderately bearish trend, recently down by 2.6%. The 4-Hour RSI is stable below 50, and the MACD indicates a negative movement, but some signs of a potential bottom suggest the bearish trend may be slowing. Support lies at $4,040, which aligns with a 61.8% Fibonacci retracement, with further targets at $4,000, a key psychological level. Gold is considered a safe-haven asset, especially in uncertain times, offering protection against inflation. Central banks, which hold significant reserves of gold, bolstered their stocks by 1,136 tonnes in 2022 to maintain economic stability. Gold prices typically move opposite to the US Dollar and Treasuries, rising during geopolitical tensions or lower interest rates while falling when the Dollar strengthens. As gold currently trades sideways below $4,100, we view this as a consolidation phase before the next significant move. The market is cautious, waiting for delayed US economic data that may indicate the Federal Reserve’s future interest rate decisions. This uncertainty creates an opportunity for traders ready for increased volatility. Given the economic context of 2025, caution is warranted. The latest CPI data from October revealed core inflation stuck at around 3.1%, which is more persistent than expected and continues to pressure the Fed. Alongside a strong labor market, with 195,000 jobs added in the last Non-Farm Payrolls report, the case for a hawkish Fed remains compelling.

Market Strategies

In the short term, with gold trading between the support level of $4,040 and resistance of $4,100, selling volatility could be a smart move. Traders might think about setting up strangles or iron condors to profit from premiums, assuming the price will stay within this range until the new data is released. However, these strategies require careful management, as a breakout is likely once the economic figures arrive. If the forthcoming data indicates economic weakness or cooling inflation, be ready for a sharp rise in prices. A move above $4,100 would suggest renewed bullish momentum, making call options a good choice to target higher resistance levels at $4,170 and the recent peak of $4,250. This scenario could occur if the US Dollar weakens as the market adjusts to a more dovish Fed stance. On the other hand, if the data shows strong economic performance and ongoing inflation, the US Dollar is likely to rally, pushing gold prices down. In this case, traders should be prepared to buy put options or short-sell if the critical support level at $4,040 is breached. The next downside targets would be $4,000, a significant psychological barrier. Additionally, it’s important to consider the long-term support for gold driven by institutional buying. Central banks accumulated a record 1,136 tonnes in 2022, and reports from the World Gold Council indicate that this trend of diversification continued through 2024. This steady demand provides a solid foundation for prices, suggesting that major players may see significant dips as buying opportunities. Create your live VT Markets account and start trading now.

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