Gold prices dropped from a record high of $4,526 during European trading on Wednesday as traders took profits. Strong US Gross Domestic Product (GDP) data could also impact gold prices since a robust GDP typically strengthens the US Dollar, making gold more expensive for buyers using other currencies. Geopolitical tensions, particularly the conflict between the US and Venezuela, might keep demand for gold steady as a safe haven. The US Federal Reserve is expected to cut rates in the future, which could boost gold prices. Financial markets anticipate several Fed rate cuts in 2026 due to signs of falling inflation and slow job growth.

Muted Trading Activity

Trading activity may slow down as the Christmas holiday approaches. Traders are looking forward to the release of the US Initial Jobless Claims data, which is expected to show 223,000 claims for the week ending December 13, down slightly from 224,000. In the third quarter, the US GDP grew at an annualized rate of 4.3%, much higher than the forecast of 3.3%. The Consumer Confidence Index dropped to 89.1 in December from 92.9 in November. President Trump hinted at choosing a Fed Chair who supports significantly lower interest rates if the economy stays strong, signaling possible changes in monetary policy. Today is December 24, 2025, and the gold market is taking a break after reaching a record high of $4,526. With the Relative Strength Index (RSI) showing overbought conditions, we can expect some profit-taking or sideways movement soon. Light holiday trading this week might exaggerate any price movements, so it’s wise to avoid making large new investments. The outlook for 2026 remains positive, mainly due to strong expectations for US Federal Reserve rate cuts. Lower interest rates make non-yielding assets like bonds less appealing, making gold more attractive. This suggests that price dips in the upcoming weeks could be seen as buying opportunities for longer-term call options or futures contracts.

Central Bank Demand

Support for this optimistic view comes from central banks, which have continued to buy aggressively throughout 2025, following a record trend in 2022. Recent data shows that emerging economies, especially China’s central bank, added 181 tonnes of gold in just the third quarter of 2025. This steady institutional demand sets a strong price floor, limiting potential losses. Nonetheless, we shouldn’t overlook the US economy’s strength, highlighted by the recent GDP growth of 4.3%. A strong economy could boost the US Dollar or affect the Fed’s willingness to cut rates as aggressively as anticipated. Therefore, a sensible strategy could be to purchase put options to safeguard against a possible short-term dip towards the $4,338 support level. In the coming weeks, it’s wise to seek entry points during price weakness instead of chasing rallies at their highs. A pullback to the $4,300 support level would provide a better risk-reward scenario for new long positions. Strategies like bull call spreads could help traders benefit from the expected upward trend in early 2026 while managing risk during this period of price stabilization. Create your live VT Markets account and start trading now.

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