Gold prices have hit a record high of $4,620 due to worries about the Fed’s independence and rising geopolitical tensions. The price rose by nearly 2% as demand for this safe-haven asset increased amid economic uncertainty. A criminal investigation involving Fed Chair Jerome Powell has shaken market confidence in U.S. policy. Tensions in places like Iran and the discussions between the U.S. and Greenland are making investors more cautious.

Key US Economic Data

This week, key U.S. economic data, such as the Consumer Price Index and job market reports, are expected. Last month’s jobs report showed an increase of 50,000 jobs, with the unemployment rate falling to 4.4%. Gold is on a strong upward trend, supported by technical indicators, even though it may face a potential pullback. The initial support level is at $4,500, while resistance above $4,600 could push it to $4,700. In 2022, central banks added a total of 1,136 tonnes to their gold reserves, showcasing their reliance on gold during tough times. Gold’s price is also affected by its relationship with the U.S. Dollar and treasuries, which makes it an appealing option against weakening currencies. Various geopolitical and economic factors, including interest rates, play a role in its price. Last year, in January 2025, gold surpassed $4,600 due to intense political pressure on the Federal Reserve. This turmoil led to an influx of investments in gold as a safe haven. The combination of Fed uncertainty and international conflicts created strong momentum for gold. During that time, implied volatility for gold options surged, making it costly to buy protection, but profitable for those selling options. The Gold Volatility Index (GVZ) rose significantly during that quarter, reflecting the market’s worries. Today, volatility has decreased, creating a new strategy for option traders.

Institutional Demand

Currently, while political drama surrounding the Fed has eased, institutional demand for gold remains strong. Central banks have continued to buy aggressively throughout 2025, following a record 1,037 tonnes added in 2023. This ongoing demand from official institutions provides a solid support for gold prices. Moreover, inflation remains stubbornly high, keeping real interest rates lower than expected. This situation makes gold, a non-yielding asset, an attractive hedge against currency depreciation for large funds. The opportunity cost of holding gold is much less concerning now than it was during the rate hikes of 2022-2023. After reaching its peak later in 2025, gold has entered a consolidation phase, leading to a more stable price range. This has lowered option premiums, making strategies like bullish call spreads or bearish put spreads more affordable for traders looking to take a position. Traders should view this reduced cost as an opportunity for the next significant move. In the coming weeks, it’s important to keep an eye on any renewed strength in the U.S. Dollar, which could put downward pressure on gold prices. Using options to manage risk, such as buying puts to protect a physical position, is a smart strategy. Any unforeseen geopolitical event could quickly increase volatility, benefiting those who are prepared. Create your live VT Markets account and start trading now.

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