Gold is close to $5,000 as it rises due to strong safe-haven demand and a weakening US Dollar. Currently, XAU/USD trades around $4,980, bouncing back from a low of about $4,899, marking its third straight week of gains. This week, gold has surged over 8%, fueled by renewed trade worries after US President Donald Trump’s comments about Greenland affected global markets. While some tensions eased with a framework agreement, the lack of specific details kept gold on its upward path.

Recent US Economic Data

Recent economic data did not help the Dollar, enabling gold to climb higher. The Manufacturing PMI ticked up to 51.9 in January, while the Services PMI remained steady. The Consumer Expectations Index improved to 57, and the Consumer Sentiment Index rose to 56.4. In Q3, the US economy grew at an annual rate of 4.4%, exceeding estimates, while inflation expectations slightly declined. The Dollar Index is approaching two-week lows and has dropped for the first time in three weeks. President Trump is in the process of selecting the next Federal Reserve Chair, and observers are closely monitoring for any dovish signals. As policy meetings approach, markets are not expecting a change in interest rates, but they are cautious about a shift toward a looser stance from the Fed. Technically, gold is on a strong upward trend but is showing signs of short-term exhaustion due to overbought conditions. Support levels are at $4,900, $4,828, and $4,709, while resistance remains strong at $5,000.

Strategic Approaches for Volatile Markets

As gold approaches the $5,000 mark, we need to prepare for volatility in the coming weeks. The clear uptrend is evident, but technical indicators like the Relative Strength Index (RSI) are showing signs of fatigue. This indicates the market is at a crucial point where a sharp movement in either direction is likely. The case for higher gold prices is still strong due to a weak US Dollar and ongoing geopolitical issues. For traders who think the “Sell America” trend will persist, buying call options with strike prices above $5,000 can help take advantage of a breakout. This strategy allows involvement in further gains while clearly defining risk. However, we must recognize the bearish divergence on charts and the psychological resistance at $5,000. If gold fails to break above this level, we could see a quick drop toward the $4,900 support zone. Buying put options can be an effective way to protect long positions or speculate on a short-term price drop. The upcoming announcement of a new Federal Reserve Chair could lead to significant price movement. Since the direction of this move is unpredictable, we can use options straddles or strangles to benefit from increased volatility. This approach allows us to profit without needing to predict if prices will rise or fall. Market anxiety is growing, creating a volatile environment for gold. The CBOE Volatility Index (VIX) has climbed above 18 this month, a sharp increase from the calmer levels seen in late 2025. This shows rising investor worries about both Fed policy and global trade stability. In the options market, there’s a significant buildup of open interest around the $5,000 strike, highlighting its importance as a key level. Additionally, we’ve noticed an increase in protective put buying below $4,900, indicating that the market is heavily positioned for a decisive and potentially large move outside the current range. Create your live VT Markets account and start trading now.

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