Gold prices fluctuated on Friday, falling from earlier highs as the US Dollar gained strength after stable US Personal Consumption Expenditures (PCE) data. This keeps gold in the same trading range seen throughout the week. Despite a temporary dip, the outlook for the Federal Reserve remains supportive. The US Dollar bounced back after the September PCE report revealed no surprises. Core PCE, which the Federal Reserve uses to measure inflation, increased by 0.2% month-on-month. The annual rate eased to 2.8%. Meanwhile, headline PCE stayed at 0.3% month-on-month, in line with expectations, and registered at 2.8% annually, slightly above August’s 2.7%.

Labor Market Volatility

Labor data indicates that the ADP Employment Change dropped by 32,000 in November, not meeting growth expectations. Challenger Job Cuts decreased to 71,300, while Initial Jobless Claims fell to 191,000, which was lower than predicted. The upcoming Nonfarm Payroll data and the JOLTS Job Openings report are crucial as we approach the Federal Reserve’s policy meeting in December. Gold continues to be a safe-haven asset amid ongoing Russia-Ukraine tensions. Technical analysis shows that XAU/USD must exceed $4,250 to draw more buyers. The overall upward trend persists, and a breakout above this level could lead to a potential rally toward $4,300 or higher. On December 6, 2025, gold was trading sideways around $4,215, influenced by the strengthening US dollar. This price stability occurs even though the market largely expects a Federal Reserve rate cut next week. It’s essential to prepare for volatility around the December 10 policy decision. The latest PCE report showed core inflation at 2.8%, a level that has remained stubborn throughout the year. While this is down from last year’s peaks, it has not yet returned to the Fed’s target of 2%. Such steady inflation reinforces market beliefs about an upcoming rate cut.

Probabilities And Market Strategy

The likelihood of a 25 basis point rate cut at next week’s meeting is at a high 87%. This aligns with a broader trend of monetary easing seen throughout most of 2025 as the economy slows. For derivatives traders, this suggests that long positions via call options could be advantageous, anticipating a gold rally if the Fed adopts dovish policies. However, caution is necessary due to mixed signals from the labor market. The significant decline in the November ADP employment report contradicts stronger jobless claims data. Notably, the official payroll report for October and November will only be released on December 16, after the Fed’s decision. This timing poses risks since the Fed will be acting based on incomplete labor data. We should consider options strategies, like buying calls, to limit downside risk in case the Fed surprises the market with a hawkish stance. A breakout above the $4,250 resistance level after the meeting would signal a return of bullish momentum. The overall environment remains favorable for gold, providing stability to prices. Ongoing geopolitical uncertainty from stalled peace talks, along with consistent central bank buying that started gaining momentum in 2022 and 2023, creates a solid support base. Thus, any dips towards the $4,160 support level are likely to be seen as buying opportunities. Looking ahead, our strategy should be cautiously bullish. Using derivatives can position us for a potential rally while managing risk. We should consider contracts that expire after December 16 to benefit from the volatility surrounding both the Fed meeting and the upcoming payroll data. If the Fed disappoints, the dollar may surge, and we need to be ready to hedge or adjust our positions quickly. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now