**Gold As A Safe-Haven Asset** Gold prices tend to move in the opposite direction of the US Dollar and US Treasuries. When other riskier investments fall, gold prices usually rise. Interest rates also play a role; when rates are low, gold prices often increase, while high rates can decrease them. Essentially, the behavior of the US Dollar greatly influences gold prices. The recent small decline in gold should not be seen as a sign of weakness. Instead, it offers a chance to buy, as it reflects a short pause in an overall upward trend. We interpret this minor price change as profit-taking at the end of the year, rather than a shift in the fundamental market direction. It’s important to look beyond daily fluctuations and pay attention to the larger economic picture. **US Federal Reserve And Gold Market** We think the gold market is mainly responding to recent hints from the US Federal Reserve, which has mentioned a pause in interest rate hikes around early 2026. This news has caused the US Dollar Index (DXY) to drop below 102, a key psychological threshold. A weaker dollar generally boosts gold prices since gold is priced in dollars. Demand for gold remains strong, which makes any price drop seem temporary. Central banks are still buying gold in large quantities; in Q3 2025, they added another 250 tonnes to global reserves. This consistent buying from official institutions provides solid support for the market. This situation is similar to what we saw in late 2023 when the market began to anticipate rate cuts for 2024, leading to significant gains in gold prices. That suggests we might soon see another major increase if the Fed confirms a policy shift. At that time, it was a prime opportunity to buy before gold’s strong performance in 2024. For us, the key metric to monitor now is implied volatility. The CBOE Gold Volatility Index (GVZ) is rising towards 17.5, indicating that traders expect larger price movements ahead. This makes buying options more appealing than trying to time the futures market just right. We should think about purchasing call options that expire in February and March 2026 to capitalize on the potential gains from a confirmed policy change. A bull call spread is another smart approach, as it lowers the initial costs for positioning ahead of a price rally. These strategies allow us to benefit from a possible price increase while defining our risk clearly. Create your live VT Markets account and start trading now.

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