Gold prices declined after the Federal Reserve decided to keep interest rates steady. The rate remains at 3.50%-3.75%, with a 10-2 split among Fed members. While inflation is still above the target, the job market shows signs of stabilizing, adding uncertainty to the economy’s future.

Gold Price Reactions

Gold initially rose to $5,290 but quickly fell back as the Dollar strengthened due to the stable job market report. The Federal Reserve aims for price stability and full employment, adjusting interest rates as needed. The Fed meets eight times a year to discuss the economy. In tough economic times, they might use Quantitative Easing to increase credit flow, which often weakens the US Dollar. On the other hand, Quantitative Tightening, the reversal of Quantitative Easing, strengthens the Dollar by stopping bond purchases. Both of these policies significantly impact the Dollar’s value. The Fed’s choice to maintain rates, despite two members advocating for a cut, leads to a shaky environment for us. This division hints at possible policy changes, but the Fed’s firm stance on the job market is keeping the Dollar strong. Expect sharp price fluctuations in the coming weeks as the market reacts to this uncertainty.

Future Gold and Market Strategy

For gold derivatives, the initial spike and subsequent drop suggest that the market direction is still unclear. The long-term trend is positive, thanks to potential rate cuts, but the timing is uncertain. We propose buying options straddles on gold futures to benefit from the expected volatility around upcoming economic data releases. This situation is reminiscent of late 2023 when the Fed paused its rate hikes before gold reached new highs. The jobs market is crucial here, and since the last Non-Farm Payrolls report in January 2026 showed a surprisingly strong addition of 216,000 jobs, the Fed can afford to wait. Therefore, selling short-dated gold call options to fund the purchase of longer-dated calls could be a sound strategy. The US Dollar’s strength seems weak and likely a temporary reaction. We view any further rise in the Dollar Index as a chance to take bearish positions using options. The dissent from two Fed Governors indicates that the current “higher for longer” stance is beginning to waver. This Fed position is supported by inflation data, with the Consumer Price Index (CPI) last quarter remaining at 3.4%, well above the 2% target. Until this figure shows a significant downward trend, the Dollar will likely find support during dips. Thus, buying put options on the Dollar appears to be a smart move to prepare for an eventual policy shift without assuming too much upfront risk. The division within the Fed signals an increase in overall market volatility. The CBOE Volatility Index (VIX), which was around 13.5 last week, is expected to rise as uncertainty about the Fed’s next steps grows. We recommend buying VIX call options with a one-to-two-month expiry to hedge against or profit from the anticipated market turbulence. Create your live VT Markets account and start trading now.

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