Gold prices nearly reached an all-time high during the Asian session on Tuesday. This rise is driven by expectations of future interest rate cuts by the US Federal Reserve and ongoing geopolitical tensions, which increase demand for gold as a safe-haven asset. Over the past month, gold prices have risen by 10% and are projected to climb 70% by 2025. Anticipation of multiple Fed rate cuts in 2026, due to easing inflation, is shaping market trends. The US economy’s annual growth rate for Q3 is estimated at 3.2%, down from 3.8% in Q2. The preliminary GDP figures are expected soon, along with data on US Durable Goods Orders, Industrial Production, and employment. Recent geopolitical developments include statements from US President Trump regarding oil near Venezuela and Russia’s intensified actions in Odesa. Currently, financial markets see a 20% chance of an interest rate cut in January, following previous reductions.

Gold Price Levels and Market Dynamics

Gold continues its upward trend even though it appears overbought, with an RSI above 70. If prices surpass the $4,400 mark, they could reach $4,450. Support is initially found at the December 22 low of $4,338, with another key level at $4,300. In the wider financial context, “risk-on” and “risk-off” sentiments characterize market behavior, impacting various currencies and assets. As we approach the Christmas holiday week, gold trades close to its all-time high. This strength is fueled by expectations that the Federal Reserve will persist with interest rate cuts into 2026, supported by November’s CPI data showing inflation easing to 2.8%. Increased geopolitical risks involving Russia and Venezuela are also driving investments into safe-haven assets like gold. The immediate focus is on today’s Q3 GDP report, which is expected to show a slowdown to 3.2% economic growth. If the report shows surprisingly strong numbers, gold prices might dip briefly. However, the overall economic outlook remains soft, particularly after the last jobs report indicated only 95,000 new jobs were created in November. This general weakness strengthens the case for lower interest rates next year. For derivative traders, the strong upward trend favors buying call options targeting the $4,400 psychological level. However, with the RSI in overbought territory, caution is warranted as a pullback could happen. This scenario likely means high implied volatility, making straightforward long call strategies more expensive.

Trading Strategies and Historical Context

A more tactical approach for upcoming weeks could involve selling cash-secured puts at lower support levels like the $4,300 strike price. This strategy allows for collecting premiums while waiting for a potential dip to create a better entry point. Alternatively, using bull call spreads can lower upfront costs while still positioning for continued, yet possibly slower, price increases. The nearly 70% increase in gold prices during 2025 is significant, reminiscent of major rallies following the 2008 financial crisis and during the 2020 pandemic. In those periods, strong demand for safe-haven assets and central bank easing led to multi-year uptrends. This historical context suggests that the current movement may gain strength as we head into 2026. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now