Gold prices are close to $4,600 as demand decreases due to easing tensions with Iran. Statements by Trump about delaying military action and urging calm have reduced gold’s appeal as a safe investment, leading to prices around $4,590. The drop in gold prices is also linked to recent US labor data, showing Jobless Claims at 198,000, which indicates a strong job market. This has led to expectations that the Federal Reserve will keep interest rates steady, potentially strengthening the US dollar.

US Economic Data and Inflation Concerns

Data from the US Census Bureau shows that Retail Sales rose to $735.9 billion in November, exceeding forecasts. Additionally, the Producer Price Index went up by 3% year-over-year, suggesting inflation pressures. The Fed’s Beige Book noted modest economic improvement since mid-November, while the US Core CPI increased by 0.2% in December, keeping the annual core inflation rate at 2.6%. Technically, gold is trading within an ascending wedge pattern, facing resistance at $4,643 and support around $4,520. A bearish reversal may occur if prices fall below the trendline with significant trading volume. In “risk-on” markets, currencies like the Australian and Canadian dollars are getting stronger. However, “risk-off” conditions favor the US dollar, Japanese yen, and Swiss franc. These changes reflect varying demand for commodities and safe-haven assets.

Gold Market Trends and Strategies

As gold retreats from its recent high near $4,643, traders should see this as a possible change in momentum. With tensions in the Middle East easing, the need for safe-haven assets is decreasing, creating chances to profit from potential price declines. Strategies might include buying put options or taking short positions in futures, anticipating a larger correction. The robust US economy supports this bearish outlook. In 2025, the labor market showed remarkable stability, adding over 200,000 jobs monthly despite high borrowing costs. The latest jobless claims stand at just 198,000, giving the Federal Reserve little reason to lower interest rates before June, which keeps pressure on non-yielding gold. In a “higher for longer” interest rate environment, selling covered calls on gold ETFs could be a smart strategy to generate income. Holding physical gold is costly, and as the market realizes that rate cuts aren’t coming soon, gold prices are likely to continue drifting downward. Options pricing may not yet fully capture this ongoing challenge, providing an opportunity for traders to act now. The technical chart depicts an ascending wedge, a typical indication of weakening upward momentum. A significant pullback here would follow historical trends, similar to the price consolidation seen after the major rally in 2020. A break below the $4,520 support level would be a strong signal to start or increase bearish positions, with a target near the 50-day average around $4,313. We should also monitor the broader “risk-on” sentiment, which gained momentum in 2025 as the S&P 500 rose over 20%. The shift of capital from safe havens to equities is likely to continue, especially if the US Dollar Index strengthens toward the 100 mark. This movement away from gold could speed up its decline in the upcoming weeks. Create your live VT Markets account and start trading now.

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