Gold prices rose during Tuesday’s Asian session, surpassing $4,350. This rebound followed a 4.5% drop in the previous session, which was triggered by increased margin requirements on gold and silver futures from the CME Group. This led to traders taking profits and adjusting their portfolios. The potential for US Federal Reserve rate cuts in 2026 is helping to support gold prices by reducing the cost of holding this asset, which doesn’t generate interest. Additionally, geopolitical issues, such as Ukraine’s alleged drone strike on Russia, are increasing the demand for traditional safe-haven assets like gold.

Trading Conditions and Technical Support

Trading volumes are expected to be low as we approach the New Year holidays. Market participants will be focused on the upcoming FOMC Minutes for guidance on economic indicators. Gold continues to be technically supported, maintaining levels above the 100-day Exponential Moving Average. Resistance is seen around $4,520, while support is noted at $4,300. US monetary policy, primarily influenced by the Federal Reserve, affects gold prices through interest rate adjustments that impact the US dollar. The Fed’s various tools, such as Quantitative Easing and Quantitative Tightening, shape financial conditions, which in turn affects gold’s appeal as a non-yielding investment compared to currency and stocks. As of today, December 30, 2025, gold is showing a slight recovery, but traders should proceed with caution. With thin trading volumes expected as the New Year approaches, price movements may become exaggerated with minimal news. Historically, futures market activity can drop by more than 30% in the last week of the year, making positions riskier. The recent 4.5% drop was largely due to the CME Group’s margin requirement increase, which compelled traders to liquidate positions. This type of rapid market drop is typical and has been observed during volatile periods in 2011 and 2020 under similar conditions. The crucial question now is whether this is merely profit-taking or the beginning of a significant market correction.

Market Sentiment and Future Outlook

The increasing expectation of Federal Reserve rate cuts in 2026 is the primary support for gold. While the chance of a rate cut in January is low, at just over 16%, the derivatives market is anticipating a more aggressive easing cycle throughout 2026, suggesting over 100 basis points in total cuts. This outlook may limit the US dollar’s upward movement and favors non-yielding assets like gold. Geopolitical tensions also provide some price support, as highlighted by the recent drone strike allegations between Russia and Ukraine. The demand for safe-haven assets is offsetting some economic strengths, such as the robust US Pending Home Sales report from November. This creates a balance between recession fears and areas of economic resilience. From a derivatives perspective, the recent volatility suggests that hedging strategies could be wise in the weeks ahead. With gold remaining above the crucial $4,300 support level, purchasing puts with a strike price below this area could provide solid downside protection. The neutral reading on the RSI indicates that the market is undecided on its direction, making options a valuable tool for managing risk ahead of the upcoming FOMC minutes. Create your live VT Markets account and start trading now.

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