Geopolitical Influences on Gold Prices

Central banks are the main buyers of gold, acquiring 1,136 tonnes valued at about $70 billion in 2022. Most of these purchases came from countries like China, India, and Turkey. Gold prices usually go up when the US Dollar and Treasuries fall. When the dollar weakens, gold becomes a good option for diversification during tough economic times. Concerns about geopolitics or recessions can increase gold prices. Lower interest rates typically support gold, while higher rates can make things difficult. Most price changes depend on how the US Dollar is performing. A strong dollar keeps gold prices low, while a weak dollar generally boosts them. Right now, gold is struggling around $4,750, pressed down by a strong US Dollar. This feels similar to a situation in 2025 when gold dropped to around $4,600. The main issue then and now is what the market expects from the Federal Reserve. Last year, Initial Jobless Claims in early January 2025 were surprisingly low at 198,000, which helped the dollar rise. Recently, data from the week ending January 9, 2026, showed claims steady at a strong 205,000. The ongoing strength in the labor market makes it hard for the Fed to lower interest rates anytime soon.

Market Strategies for Traders

Since gold doesn’t provide any yield, it competes with US Treasuries for investment. The latest Non-Farm Payrolls report for December 2025 showed a solid addition of 210,000 jobs. Now, the CME FedWatch Tool indicates that traders think there’s less than a 30% chance of a rate cut before June, causing Treasury yields to rise and pushing gold prices down. Currently, geopolitical risks that usually boost gold’s appeal seem to be easing. Unlike early 2025 when tensions with Iran were a concern, recent talks about trade routes in the South China Sea have reduced market worries. This calmer international scene is taking away some support for gold prices. Despite these challenges, we need to keep an eye on central banks, who have been major buyers recently. According to the World Gold Council’s data for the third quarter of 2025, central banks—especially in Asia—added over 250 tonnes to their reserves. This steady demand might help prevent gold prices from collapsing completely. With the strong dollar and high interest rates, traders might think about buying put options to make a profit if prices drop towards $4,700. For those who believe a price floor is forming, selling out-of-the-money call options or setting up a bear call spread could help earn income while limiting risk. We should also pay attention to speeches from Fed officials this week, as any change in tone could shift expectations. Create your live VT Markets account and start trading now.

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