Gold has dropped from its record highs, falling 0.7% to $3,665. Even with this drop, it is still up about 0.6% for the week and over 6% for the month, countering the usual seasonal trends. This decline comes after a brief rise above $3,700 during overnight trading, as traders took profits ahead of the Federal Reserve’s decision.

Gold’s Positive Outlook

Gold remains positive after recently breaking past $3,500. If the dollar strengthens after the Fed’s announcement, we might see a slight dip in momentum. The important moving averages to watch are $3,658 and $3,636. If these levels are broken, it could trigger more selling. A short-term dip in gold prices is possible, but as long as U.S. economic data weakens and the Fed continues to lower rates, gold is likely to go up. Additionally, gold’s ongoing rally supports a strategy of buying during significant pullbacks or corrections in the broader market. With gold retreating from its near $3,700 peak, all eyes are on today’s Fed decision. The impressive 32% increase in gold prices so far in 2025 reflects strong demand. Traders should be alert for any surprises that might boost the dollar and temporarily push gold down. In the short term, this pullback can create hedging opportunities. We are monitoring the key moving averages at $3,658 and $3,636 as critical points. A fall below these levels could lead to a deeper, but likely short-lived, correction, making short-dated puts a sensible strategy to safeguard profits.

Long-Term Positive View

The long-term outlook for gold remains positive, so any major dip should be viewed as a buying chance. The August 2025 jobs report revealed modest payroll growth of just 140,000, and core inflation has eased to 2.4%. These factors give the Fed plenty of reasons to keep easing, supporting higher gold prices as the year ends. This scenario echoes what occurred in 2019 when the Fed shifted to cutting rates, and gold embarked on a substantial rally over several months. History suggests that once rate cuts are confirmed, gold tends to move upwards. Current conditions, along with ongoing geopolitical issues, strengthen this long-term positive outlook. In the upcoming weeks, derivative traders might explore selling cash-secured puts at lower strike prices, like $3,600 or even $3,550, to earn premiums while waiting for a pullback. For those with a longer-term perspective, buying call options set for early 2026 allows you to join in the anticipated rally while managing risk. This positions you well for the trend of softer economic data and continued central bank easing. Create your live VT Markets account and start trading now.

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