Gold prices have reached seven-week highs, hitting around $4,275 in early Asian trading. This increase comes after the US Federal Reserve cut interest rates by 25 basis points, which has weakened the US Dollar. Additionally, a rise in unemployment benefit claims in the US has further weakened the Dollar, benefiting Gold prices. The Fed has set interest rates between 3.50% and 3.75%, and there is a 78% chance that they will maintain these rates next month.

Potential Impact Of A Ukraine Peace Deal

A peace deal in Ukraine could lower Gold prices, which is usually a safe-haven asset. President Zelensky has spoken with US officials about security guarantees, presenting a 20-point plan to resolve the conflict with Russia. Gold tends to perform well when the US Dollar weakens, as this encourages central banks to diversify their reserves. Central banks, especially in countries like China, India, and Turkey, have significantly increased their gold reserves. Geopolitical uncertainty and lower interest rates usually cause Gold prices to rise because it is seen as a safe-haven asset. The price of Gold is negatively affected by US Treasuries and the Dollar, changing with interest rates and global market trends. Gold is currently trading at seven-week highs around $4,275 after the Federal Reserve cut rates. The new rate range of 3.50-3.75% weakens the US Dollar and boosts dollar-denominated assets like gold, making this adjustment seem reasonable based on recent economic data.

Strategies For Traders

New unemployment claims surged to 264,000 last week, marking the largest rise since mid-2021, which indicates weakness in the labor market. However, the November 2025 CPI report shows core inflation steady at 3.1%, suggesting the Fed might pause further rate cuts for now. This situation presents challenges for traders. For those optimistic about gold, purchasing call options is a recommended strategy. Historical data shows that low rates reduce the cost of holding non-yielding gold. Additionally, central banks have added over 800 tonnes of gold this year, providing strong support for price increases if economic data continues to weaken. Conversely, the possibility of a Ukraine peace deal poses a significant risk that could reduce gold’s safe-haven value. This concern, along with the Fed’s intention to pause rate changes, suggests that buying put options or initiating bearish spreads could be beneficial if a peace agreement is reached. The market already anticipates a 78% chance that the Fed will keep rates steady next month, which could limit this price rally. Given these conflicting factors, traders might also explore strategies that capitalize on significant price shifts in either direction. Using options to create a straddle or strangle could effectively address the expected rise in volatility. The results of the peace talks or major economic data releases could easily push prices out of their current range, allowing this strategy to succeed without needing to predict the correct direction. Create your live VT Markets account and start trading now.

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