Gold prices fell to about $4,030 in early Asian trading due to lowered expectations for a rate cut by the US Federal Reserve. Traders are looking to the upcoming US September Nonfarm Payrolls report for more insight. The US Dollar’s three-day rise has made gold pricier for those using foreign currencies. Recent statements from Fed officials that favor steady rates added to this outlook.

Probability Of A December Rate Cut

Market data indicates a 45% chance of a rate cut in December, down from over 60% last week. Analysts at UBS believe that upcoming data may not change support for a third cut this year. Gold has long been seen as a stable asset and a medium for exchange, especially during uncertain times. Central banks trust in gold and increased their reserves by 1,136 tonnes in 2022. Typically, gold prices increase when the US Dollar and Treasuries fall. It becomes more attractive during geopolitical unrest or recession fears due to its safe-haven reputation. China added an estimated 15 tonnes to its gold reserves in September. The central bank purchases may help reduce gold’s downside risks as countries diversify their reserves.

Traders Strategies Amid Market Conditions

With gold prices dropping to around $4,030, there is immediate downward pressure. The stronger US Dollar and hawkish comments from Federal Reserve officials present challenges for gold. This points to potentially favorable bearish strategies in the short term. Recent data supports the Fed’s cautious approach, as last week’s October Consumer Price Index showed persistent inflation at 3.5%. The last jobs report indicated that 210,000 jobs were added, giving the Fed less reason to cut rates. The Nonfarm Payrolls report due this Thursday will be crucial; if it shows continued economic strength, gold prices could drop further. In this scenario, traders might consider buying put options to benefit from a possible fall below the important $4,000 mark. This fits with market sentiment, as the likelihood of a December rate cut has dropped from over 60% to only 45% in a week. Looking back at 2022-2023, gold faced challenges when markets anticipated a more aggressive Fed policy. However, robust support is being established by central banks, which should limit the downside. China’s acquisition of 15 tonnes in September is part of a broader trend, with global central banks adding another 260 tonnes to their reserves in Q3 2025, according to the World Gold Council. This steady buying, a continuation of record accumulation in 2022, makes a strong case against overly bullish short positions. This situation creates a balance between Fed policy and physical demand, likely leading to increased volatility. For those unsure of the market direction before the NFP data, using options for potential volatility spikes, like a long straddle, could be a wise strategy. This allows traders to profit from significant price movements in either direction following the jobs report. Create your live VT Markets account and start trading now.

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