Gold stays steady near $4,200 as traders proceed with caution ahead of the Federal Reserve’s interest rate decision. The US Dollar remains stable, and Treasury yields are rising, which limits gold’s chances for a significant increase while keeping it within its one-week range. Traders are reluctant to make new moves as XAU/USD is trading around $4,190, following a peak of $4,219. Markets are anticipating the Federal Reserve’s final policy decision for 2025, with expectations of a rate cut that would lower the Federal Funds Rate to 3.50%-3.75%. Recent PCE data and mixed employment indicators suggest a cautious approach to easing monetary policy for 2026. This has helped stabilize the USD and drive Treasury yields higher. Ongoing geopolitical concerns, such as the Russia-Ukraine conflict and regional tensions, also maintain gold’s appeal.

The US Dollar And Treasury Yields

The US Dollar Index (DXY) has recovered slightly, trading around 99.10. Treasury yields are up, with the 10-year yield near 4.186%. PCE inflation remains unchanged, with Core PCE meeting the monthly expectation of 0.2% in September. Labor data shows mixed results: ADP Employment Change fell by 32,000, while Initial Jobless Claims dropped to 191K. According to the CME FedWatch Tool, there’s an 87% chance of a 25 basis points rate cut. Gold ETFs saw inflows of $5.2 billion, raising total assets to $530 billion. Gold is currently holding within the range of $4,200 to $4,180. Support is at $4,201 from the 50-period SMA, and deeper support comes from the 100-period SMA at $4,143. The $4,250 resistance level is crucial for bullish momentum. Gold continues to be viewed as a safe-haven asset, often gaining when the Dollar weakens. Central banks, which are major holders of gold, increased their reserves by 1,136 tonnes in 2022. Gold’s inverse relationship with the Dollar and US Treasuries affects its price movement, supporting diversification in uncertain times.

Market Reactions And Strategies

Gold is currently stuck around the $4,200 mark as the market awaits Wednesday’s Federal Reserve decision. While an 87% chance of a rate cut is priced in, the main focus will be on the Fed’s outlook for further easing in 2026. The recent stalling of PCE inflation at 2.8% suggests that policymakers may be more cautious than expected. This quiet time before the Fed’s announcement provides an opportunity to sell volatility. The Average Directional Index (ADX) is low at 12.7, indicating a weak trend. Strategies such as selling strangles outside the $4,180-$4,250 range could be considered to gather premium, benefiting from stable prices until the Fed’s announcement. If the Fed unexpectedly adopts a hawkish stance, signaling a pause in rate cuts for early 2026, we could see the US Dollar Index return to 100 and the 10-year yield rise above 4.186%. In this case, we would look for a decisive break below the $4,180 support level to trigger further downside positions using put options or bear put spreads. On the other hand, if the Fed presents a dovish message along with the expected rate cut, we might see a breakthrough over the $4,250 resistance. This would be supported by strong underlying demand, as shown by the World Gold Council’s recent report indicating a sixth consecutive month of inflows into Gold ETFs in November. A break above this level would be an opportunity to use call options targeting a retest of all-time highs. It’s also important to note the continued support from global central banks, which has been significant since their record purchases in 2022. This ongoing demand from official institutions creates a solid foundation for the market and explains the consistent dip-buying seen around the $4,180 level, acting as a buffer against any aggressive selling pressure. Create your live VT Markets account and start trading now.

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