Gold has dropped below $4,200, trading at $4,195, down by 0.27% from a daily high of $4,219. This decline is influenced by rising US Treasury yields and the anticipation of the Federal Reserve’s upcoming interest rate decision, keeping prices below the $4,200 mark. Even though geopolitical tensions, especially the ongoing Russia-Ukraine conflict, make gold more attractive as a safe haven, concerns about a ‘hawkish cut’ may limit its potential rise. Meanwhile, the US is releasing employment and job opening reports, accompanied by higher Treasury yields and a stronger US Dollar.

Rising Yields And Dollar Strength

The 10-year US benchmark note has risen nearly three basis points to 4.168%, with real yields also increasing by three basis points to 1.908%. The US Dollar Index is up by 0.11%, now at 99.09. These geopolitical events are still affecting gold prices, which may see an increase in the near future. Central banks, the largest gold holders, significantly boosted their reserves by adding 1,136 tonnes worth $70 billion in 2022. Gold’s price tends to rise when demand for safe havens increases, while it typically falls with riskier assets. If the US Dollar weakens, gold prices may go up, providing protection against geopolitical issues and fears of recession. With gold hovering just below $4,200, everyone’s attention is on this week’s Federal Reserve meeting. An anticipated rate cut could be positive for gold, but rising Treasury yields may create resistance, leading to volatility as these opposing forces react to the Fed’s announcement. The market is pricing in an 86% likelihood of a 25-basis-point rate cut, which would be the third consecutive cut as we approach 2026. However, it’s crucial to closely monitor the Fed’s tone. A ‘hawkish cut’ suggesting a pause in rate easing could halt this rally. A similar scenario occurred in 2019 when the Fed’s shift to cutting rates triggered a lengthy rally for gold.

Options Market Positioning

In the options market, there is growing interest in call options with strike prices at $4,250 and even $4,300 that will expire soon. This shows that many traders expect a breakout after a dovish Fed decision, which could enhance any upward movement if the Fed meets market expectations. Conversely, the increase in 10-year real yields to 1.908% is a significant challenge. If gold can’t regain the $4,200 level and drops below the 20-day moving average around $4,144, it could lead to a quick decline. This level acts as a critical support line for the current upward trend. Nonetheless, support remains strong due to ongoing safe-haven demand and central bank activities. After record purchases in early 2020, central banks have continued their buying spree, with World Gold Council data showing over 950 tonnes added to reserves year-to-date in 2025. This sustained demand from official sources strengthens the market and limits the chances of a sharp decline. Before the Fed meeting, we will watch tomorrow’s JOLTS and ADP employment reports for any signs of weakness in the labor market. A weaker jobs report could support the case for a Fed rate cut, likely weakening the US dollar and giving gold a boost. Conversely, a strong report could raise pressure on yields and make it harder for gold to rise. Create your live VT Markets account and start trading now.

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