Gold is now priced at about $4,200 per ounce. This is due to a possible December rate cut by the Federal Reserve and a weaker US Dollar. Although central banks continue to buy gold, political changes in Italy could impact gold ownership. Meanwhile, low demand for gold may keep prices from rising further. The US Dollar Index (DXY) has recently dropped below 99, which has helped boost gold prices since gold and the dollar typically move in opposite directions. Most of the market already expects a 25-basis-point rate cut, so any further decline in the dollar might not be significant. Still, weak demand for gold may prevent price increases in the near future. In October, central banks added a net 53 tonnes of gold, marking the highest monthly increase of the year and a 36% rise from September. However, there could be shifts as the Italian government considers changing ownership of their central bank’s gold reserves. Previous attempts to transfer these reserves to the Treasury have faced resistance from EU officials. The Federal Reserve will make its rate decision on December 9-10. The market expects a cut, with the CME FedWatch Tool showing an 88% chance of a 25-basis-point decrease. This anticipation has pushed gold up to $4,200. The actual announcement may not cause much price change, resulting in a “buy the rumor, sell the news” scenario. In the coming days, traders might consider short-dated call options to take advantage of any last-minute price increases while minimizing risks. A bull call spread could help lower costs ahead of the Fed’s decision. After the announcement, switching to protective puts for late December or January can serve as a hedge against a potential price drop as the market takes profits. The US Dollar Index’s fall below 99 is a crucial support for gold, and we expect this trend to continue. The weaker dollar is linked to recent soft economic data, including a labor report from last Friday showing slower job growth than expected. This inverse relationship has been a reliable indicator throughout 2024 and 2025. However, caution is necessary as high gold prices are reducing demand in important markets like India and China. While strong buying from central banks creates a solid market foundation, the lack of consumer interest at these prices could limit further gains. Official sector purchases this year are likely to match the record levels seen in 2022, indicating a long-term shift away from reliance on the dollar. Italy’s political situation concerning its gold reserves adds uncertainty and could lead to market volatility. Although significant changes in ownership are unlikely to occur immediately, any news on the topic could cause sudden price swings. This situation underscores gold’s appeal as a safe-haven asset, making any sharp price dips potential buying opportunities for long-term investors.

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