Gold prices have dropped to around $4,200 as momentum fades. The metal is having trouble holding onto gains after hitting a resistance range of $4,230 to $4,250. Expectations about the Federal Reserve’s interest rates and a weaker US Dollar have bolstered gold’s value. Prices have pulled back from the all-time high of nearly $4,381 but are still up almost 5% for the week.

Impact of US Government Shutdown Ending

The end of the US government shutdown has affected market interest as federal operations restart. Traders are now paying close attention to US economic data, which could influence the Fed’s interest rate decisions. A more cautious Federal Reserve outlook has weakened the US Dollar and Treasury yields, supporting gold prices. Nevertheless, some Fed officials, such as Boston Fed’s Susan Collins, warn against expecting rate cuts soon. Central banks are major gold holders, purchasing 1,136 tonnes worth $70 billion in 2022. Countries like China, India, and Turkey are boosting their gold reserves. Gold prices tend to move in the opposite direction of the US Dollar and Treasuries. Geopolitical tensions or recession fears can also affect prices because gold is often seen as a safe haven. Since gold is priced in US dollars, fluctuations in the Dollar’s value can influence gold prices. A stronger Dollar generally keeps gold prices lower, while a weaker Dollar tends to raise them. Gold is currently struggling to break through the $4,250 resistance level, indicating a slowdown in recent bullish momentum. The market is at a crossroads, and the overbought condition indicated by the Relative Strength Index (RSI) at 74 suggests caution. This points to a likely short-term pullback or consolidation before any upward movement. The Federal Reserve is still the main influence on gold prices, with the market pricing in a 53% chance of an interest rate cut in December. However, recent comments from Fed officials like Susan Collins have dampened those expectations, creating uncertainty. This conflict between market hopes and Fed statements may lead to volatility in the upcoming weeks. To make educated decisions, we need to consider the latest economic data. The October Consumer Price Index (CPI) report, released on November 7, 2025, showed stubborn headline inflation at 3.4%, above the Fed’s 2% target. This ongoing inflation supports a cautious Fed stance and could adversely affect gold if it prompts the market to lower rate cut expectations.

Consequences of Temporary Government Deal

The recent agreement to end the government shutdown has temporarily eased fiscal worries, which may slightly weaken gold’s safe-haven appeal. However, this is a short-term fix that lasts until January 30, 2026. The potential for another political clash early next year should provide solid support for gold prices. Given these mixed signals, volatility seems to be the most likely outcome. Derivative traders might explore strategies like long straddles or strangles, which can benefit from significant price swings in either direction, regardless of whether they are up or down. These strategies could be particularly useful as we approach the December Fed meeting. For option traders, clear technical levels provide good opportunities for strategy development. The $4,230-$4,250 zone is a key area for selling call credit spreads or buying puts, particularly if resistance holds. In contrast, support levels around $4,150 and the psychological mark of $4,000 are appealing for selling put credit spreads or buying call options during significant dips. We must also keep in mind the strong underlying support from central banks, which strengthens the long-term bullish case for gold. The World Gold Council’s Q3 2025 report confirmed that central banks, led by China and India, continued their record-breaking purchases from previous years. Reflecting on the last major Fed easing cycle in 2019, we witnessed a substantial gold rally, setting a historical precedent for potential outcomes if the Fed begins to cut rates. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now